This is another post from the Suggest a Topic page, and it’s about Options trading on ETFs, or rather the lack of ETF Options in India.
Here is Amruta’s comment.
ETF Options are widely traded in US markets. Would like to know ur take on their introduction in Indian markets? which etfs should they b introduced on?? Thanx..
I feel that it’s only a matter of time when Options are introduced on ETFs in India. In fact a few months ago there were plans to create Options on the popular Benchmark Gold BeeS ETF on NSE, but then the FMC (Forward Markets Commission) wrote to the NSE (National Stock Exchange) saying that they should have jurisdiction over Options trading on the commodity based ETF since they already regulate commodities future, and this is quite similar to that product.The launch was then stopped, and since then I haven’t read anything on the matter, but I think this will happen in due course, and after that Options on other ETFs will be launched as well.
I think that it’s good to have Options on these ETFs, as it allows people who are so inclined to take positions and test out their theory.
I have no doubt that a lot of people will lose money in trading Options, but that is no different than trading in stocks, and I’m sure there will be people who make money on them as well.
It also allows you to take short positions which you can’t do without Options. For example, currently, there are no easy ways for small investors in India to take a short position in gold if they’re so inclined but if there were Futures and Options on Gold BeeS they could have sold a Future or bought Puts.
Compare this with the US where a small investor can easily buy long dated Puts on either the popular gold ETF GLD, or even gold mining companies like ABX, and I feel that the Indian investor is at a disadvantage.
Options are not for everyone, but there is a segment of investors who understand these products, can use them, and even eagerly awaiting them, and I feel that it’s only a matter of time before which their wish is granted.