The expiry of August contracts in the equity futures and options (F&O) segment at the National Stock Exchange on Thursday saw the trading value in F&O on NSE touch Rs 156,182 crore, the third largest level ever. The largest and second-largest turnover of Rs 166,193 crore and Rs 158,504 crore, respectively, was reached on January 28 and January 27 this year.

A few analysts, FC spoke to, said the open positions in the near month contracts of stock futures, which normally get rolled over a few days before expiry date, was not only rolled over on the expiry day on Thursday but was also at a large level. There are 202 stocks on which F&O is permitted and all of them attract futures trades every day.

But index options, almost all of it being options on S&P CNX Nifty index, makes up for the largest component of all trading in F&O on NSE (see graph). "This has been the case for more than a year now, aided by a new lower cost structure for options that took effect around two years back. It is a good sign as it makes our equity derivatives market in sync with mature ones internationally where index options attract the highest trading," said Vineet Bhatnagar, managing director of MF Global-Sify Securities India, one of the largest brokerage firms in derivatives.

Index options traded value was Rs 79,838 crore on Thursday, not far from its all-time highest level of Rs 89,049 crore reached on June 24 this year. Stock futures attracted Rs 47,901 crore worth of trade on Thursday, the highest in the last one year. But the all-time high level in stock futures traded value was Rs 71,195 that took place on November 1, 2007.

When traders and investors roll over their open positions they do so from a near-month contract that is expiring to the next month contract. On Thursday, the roll over of F&O were from August-end contracts to September-end contracts. To roll over, say, an open buy position in Reliance's August futures, a trader would have sold Reliance's August futures and bought Reliance's September futures.

The equity market has not been volatile in the last two months with the Nifty moving in a narrow range between 5,200 and 5,600. But some believe the high trading turnover in F&O could be a harbinger of short-term bearishness. "The leverage has increased and the market is in a risky zone," Vikas Khemani, head of institutional equities at Edelweiss Capital said. The current month's average daily total turnover in F&O on NSE, however, stood at Rs 93,191 crore, lower than the highest level of average daily of Rs 101,166 crore touched in May this year. June and July saw respective average daily turnover of Rs 92,527 crore and Rs 83,177 crore.

Foreign institutional investors have also been been active. In August, their gross trades (purchases and sales) in index and stock F&O added to Rs 383,247 crore, or 22.80 per cent of total gross trades in F&O.