Consider the following statements I. India accounts for a very large portion of all equity option contracts traded globally thus…

Question

Consider the following statements:

I. India accounts for a very large portion of all equity option contracts traded globally thus exhibiting a great boom.

II. India's stock market has grown rapidly in the recent past even overtaking Hong Kong's at some point of time.

III. There is no regulatory body either to warn the small investors about the risks of options trading or to act on unregistered financial advisors in this regard.

Which of the statements given above are correct?

1. A. I and II only (Correct answer)
2. B. II and III only
3. C. I and III only
4. D. I, II and III

Correct Answer

Option A — I and II only

Detailed Solution & Explanation

The correct answer is I and II only.

Key Points

• Explanation: Statement I is correct — India accounts for a very large share of global equity option contracts by volume, on some measures around 78-80% of all equity options traded worldwide, reflecting an extraordinary boom in retail derivatives activity.
• Statement II is correct — India's stock market has grown rapidly and its market capitalisation overtook Hong Kong's in January 2024, briefly making India the world's fourth-largest equity market.
• Why Statement III is wrong: A regulator very much exists.
• The Securities and Exchange Board of India (SEBI) has repeatedly warned small investors about the risks of options trading, and it actively acts against unregistered financial advisors and "finfluencers".

Additional Information

• A SEBI study found that roughly 9 out of 10 individual traders in the equity futures and options segment incurred losses, which prompted tighter rules on index derivatives.