The first expiry for the calendar year 2006 started on December 30, 2005. The expiry date for these contracts was January 25, 2006. The number of trading days was 18 as compared to an average of 21 trading sessions of all expiries till now. Nifty touched an all-time high of 2927 on January 9, 2006, before tanking down to 2783 on January 18, 2006. The fall was of 144 points (approximately 5%). Like any fall in a bull market, it was steep and sharp.

The derivative volumes of this expiry were higher than average as compared to the previous expiries. The average daily derivatives volumes were around three times the cash volumes. The segmental break-up also saw the usual bent towards futures as compared to options. The futures volume comprised of around 88% of the equity derivatives volume as compared to 12% by options. The share of index derivatives was about 43% and stock derivatives was about 57% in total volumes. This indicates that there was a lot of hedging undertaken, as index derivatives are primarily used as a hedging tool by FIIs. One of the possible reasons for the heavy hedging activity could be the de-merger announcement by Reliance and its ex-date falling the current expiry.

The current expiry started with a market open interest (consists of both futures and options) of Rs. 229 bn and futures open interest of Rs. 205 bn. Market-wide open interest touched an all time of Rs. 355 bn on January 20, while futures open interest touched an all-time of Rs. 255 bn on January 12, and has been consistently rising since then. The open interest build-ups in terms of shares were not at an all-time high, but the value of open interest touched an all-time high on the back of rising prices.

Portfolio Organizer Magazine, Derivative Alerts on Recent Expiry, DARE, Derivative Volumes, Equity Derivatives, Foreign Institutional Investors, FIIs, Stock Futures, Indian Markets, Derivatives Strategies, Reliance Industries, Derivative Instruments, Indian Stock Market.