The BSE will be introducing weekly futures and options (F&O) contracts on its index, the S&P BSE Sensex 50 on Friday, this week.
The bourse will be introducing 7 weekly futures and options contracts that expire every Thursday of the week, excluding monthly expiry week, the exchange said in a circular. In case Thursday is a holiday, then contract expiry will be on a working day prior to it. New serial weekly future and options contracts will be introduced after the expiry of the respective week's contract, it said.
The circular also said that the exchange these weekly futures and options contracts will be available with effect from Oct. 26, 2018. The S&P BSE Sensex 50 was launched by the leading index provider Asia Index (a joint venture between BSE and S&P Dow Jones Indices) in December 2016 to measure the performance of the 50 largest BSE-listed companies.
Derivative in financial markets typically refers to a forward, future, option or any other hybrid contract of pre- determined fixed duration, that is linked to the value of a specified real or financial asset or to an index of securities (from which it 'derives' its value), for the purpose of contract fulfillment.
Broadly speaking, the two types of derivative contracts are futures and options. A 'futures' contract means a legally binding agreement to buy or sell the underlying security on a future date, while options contract gives the buyer or holder of the contract the right (but not the obligation) to buy or sell the underlying asset at a pre-determined price within or at the end of a specified period.