tag:blogger.com,1999:blog-19649274.post113725500543116351..comments2024-03-27T17:16:12.789+05:30Comments on The Leap Blog: What's the Indian investor to do about global macroeconomic imbalances?Ajay Shahhttp://www.blogger.com/profile/03835842741008200034noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-19649274.post-1137263466602670052006-01-15T00:01:00.000+05:302006-01-15T00:01:00.000+05:30Sir,What is 'Direct Market Access' and how does i...Sir,<BR/><BR/>What is 'Direct Market Access' and how does it improve liquidity in options market ?Ravi Purohithttps://www.blogger.com/profile/17616076999283569192noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-1137260059157915742006-01-14T23:04:00.000+05:302006-01-14T23:04:00.000+05:30The implied vol we see with Nifty is much higher t...The implied vol we see with Nifty is much higher than that associated with the S&P 500. And, the interest rate in the US is lower. So put together, the S&P 500 put options are much cheaper than Nifty options.<BR/><BR/>The S&P 500 options are also much more liquid. Lacking `Direct Market Access' (DMA), the Indian options market is rather clunky. You can easily do a $100 million transaction using the S&P 500 options. You can't do a $100 million buy of put options (notional value, of course) of Nifty puts without much trouble. In the case of Nifty options, you really only have one-month expiration, but with the S&P 500 puts, you have fair liquidity all the way out to 6 months.<BR/><BR/>Another aspect is that your trade should flow from your view. My blog posting argued that the global macro imbalances pose a substantial threat to long positions on Indian equity. If that is the view, then the most<BR/>effective ways to express that view are those that directly tap into the global business cycle.<BR/><BR/>Can we do things like VIX here in<BR/>India? Yes, but the first and more<BR/>basic problem is to get the options<BR/>market to work properly. In my mind,<BR/>the #1 bottleneck is the lack of<BR/>`Direct Market Access' (DMA).Ajay Shahhttps://www.blogger.com/profile/03835842741008200034noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-1137259442901424702006-01-14T22:54:00.000+05:302006-01-14T22:54:00.000+05:30Hi Sir,How about selling out_of_the_money calls on...Hi Sir,<BR/><BR/>How about selling out_of_the_money calls on the Nifty index or even buying out_of_the_money puts ? Wont these enable domestic investors hedge their portfolios ? <BR/><BR/>With the Union Budget around the corner, i think one really misses having instruments such as VIX options/futures, here in India ? If only financial innovation can take pace in India ?<BR/><BR/>Best Regards.Ravi Purohithttps://www.blogger.com/profile/17616076999283569192noreply@blogger.com