I have been trading Nifty every single day for the last six years. In all this time, I never really thought of trying to trade SENSEX options on BSE. Today, I gave it a try, and the experience was quite different from what I am used to.
The first thing I noticed was that SENSEX options are illiquid. That part isn’t a surprise because most of the volume in India’s options market is concentrated in Nifty and BankNifty on NSE. But what struck me was something more interesting: the pricing felt inefficient.
Usually, in Nifty options, you can see a strong connection between the movement of the index and the movement of option premiums. But with SENSEX, I observed that the spot was moving in one direction while the options were not reacting the same way. At times, the premiums moved in a completely different manner.
I’ve felt a similar kind of mismatch in BankNifty too, though to a much smaller extent. The difference is that in BankNifty, inefficiencies don’t last long because there is so much liquidity and so many traders, including algos, who immediately correct the mispricing. In SENSEX, however, the inefficiency lingers longer, probably because there just aren’t enough participants or market makers stepping in.
This raises an interesting point: why are other indexes not as efficient? The answer seems clear to me traders, institutions, and even retail investors prefer to focus on Nifty because of their depth and activity. That leaves SENSEX options thinly traded, less watched, and less efficient.
So yes, I strongly feel that SENSEX options are inefficient compared to Nifty. It might look like an opportunity, but the lack of liquidity makes it very tricky to actually trade. In the end, most traders will stick to Nifty, while SENSEX remains more of an experimental playground.