In BSE, we have future and option contracts based on Bankex for trading. In this article, you will learn what Bankex is and how future and option contracts of Bankex are traded in the stock exchange.
Futures and options are derivative contracts which derive value from an underlying asset. Underlying assets can be stock, agri commodities, index, crude oil, silver, cotton, gold, ETFs, natural gas and currencies.
In our case, for future and option contracts of BSE Bankex, the underlying asset is Bankex index. Similar to Bankex, we also have BSE sensex which tracks 30 large cap stocks from different sectors including banking.
What is Bankex?
BSE Bankex is a sectoral index for Banks comprising top listed banking stocks. Which means it tracks the performance of major banking stocks in India to know how the overall banking market has performed.
In BSE Bankex we have 10 listed banking stocks. Out of these, HDFC Bank, ICICI Bank, SBI and Kotak Bank have more weightage. All these 10 stocks consist of stocks that hold more than 80% of the combined market cap of the banking sector in India.
Here is the list of 10 stocks that constitute the BSE Bankex index;
| Bank of Baroda | HDFC Bank |
| State Bank of India | ICICI Bank |
| Indusind Bank | Federal Bank |
| Kotak Bank | Axis Bank |
| IDFC First Bank | AU Small Finance Bank |
BSE Bankex futures
Futures are derivative contracts which derive value from an underlying asset. In Bankex futures, the underlying asset is BSE Bankex index.
BSE Bankex futures come with 7 weekly and 3 monthly contracts.
Monthly future contracts expire on the last Monday of each contract maturity month. Weekly contracts will have an expiry on Monday of the week.
Lot size of future contracts of Bankex is 15.
Future contracts are cash settled based on the closing price of the underlying BSE Bankex on the date of expiry.
BSE Bankex Options
Options are a type of derivative contract which gives the right but not the obligation to exercise their contract at a fixed price on a predetermined date. Like any other derivative contracts, BSE Bankex options derive its value from the underlying Bankex index.
Similar to Bankex, we have Bank nifty futures and options traded in NSE.
We have two types of option contracts: call and put. All these Bankex options are european style.
BSE Bankes comes with 7 weekly and 3 monthly contracts.
Lot size of option contracts of Bankex is 15.
Expiry date for BSE Bankex option monthly contracts is last monday of each contract maturity month. Weekly contracts expire on Monday of the week.
In case the date of expiry is a trading holiday, then the immediately preceding business day is considered as expiry date.
Option contracts are cash settled based on the closing price of the BSE Bankex index on the date of expiry.
Trading hours for both future and option contracts of BSE Sensex and BSE Bankex is 09:15 AM to 03.30 PM.
Futures and option contracts have an expiry date. After this date, these contracts will not have any value. Therefore, many investors interested in investing in the BSE Bankex index, prefer to invest directly in the constituent stocks of the BSE Bankex index based on their weightage.
We also have ETFs and index mutual funds which are based on the BSE Bankex index to generate similar returns with less cost.
Please note, market risk is inherent. The price fluctuation can be in favour or against you, causing you to earn profit or suffer losses. Therefore, market veterans suggest diversification as a key to reduce market risk.
As a beginner, if you are interested in trading or investing in futures, options or any other financial market linked products, then we suggest you to have in depth knowledge on the subject and have a proper risk management system. Learn fundamental analysis, technical analysis, candlesticks, trading style and chart patterns.
After having in-depth knowledge on the subject, find out which trading style suits you the most. We have intraday, swing trading, BTST, positional trading and scalping.
We suggest seeking guidance from a SEBI approved research analyst, investment advisor and financial professional before trading or investing in the stock market.
Disclaimer: In addition to the disclaimer below, please note, this article is not intended to provide investing or trading advice. Trading in the stock market and in other securities entails varying degrees of risk, and can result in loss of capital. Most investors and traders lose money. Readers seeking to engage in trading and/or investing should seek out extensive education on the topic and help of professionals.
