Expiration-Day Effects of Equity Derivatives in India: An Opinion Survey

Abstract

The present study focuses upon the impact of derivatives trading on underlying stock market behaviour at and around expiration-days of these contracts. Expiration-day effects may arise from a variety of reasons such as unwinding of arbitrage positions, activities of speculators and manipulators, and market settlement procedure. The study is using primary data collected through opinion survey of stock brokers for finding causes for abnormal behaviour of underlying stock market at expiration-day of derivatives contracts and to get an insight into probable measures to deal with undesirable expiration-day effects, if any. The results of the study indicated expiration-days of derivative contracts are not catastrophic in Indian stock market and thus, no alteration in existing regulations of stock market seems desirable.