Since products on the options market are leveraged, investors can move large positions with relatively small invested capital. This feature of options makes them a useful tool for building highly speculative positions with substantial risk while at the same time maintaining their usefulness as a hedging tool.
By combining different types and variations of options, investors can achieve any investment strategy designed for a bull or bear market or even for stagnating market conditions.
Similarly to the futures market, the options market offered through the BSE consists of options contracts based on the following underlying instruments:
- equity indices
- individual stocks
- currency (foreign exchange)
Options products on the Exchange are standardized. The Stock Exchange sets the parameters of options contracts in order to enhance liquidity and to mirror the needs of different marker players. Among these parameters the type of the contract (put / call), option style (American / European), expiration dates, contract size, delivery method and strike prices are the most important.