Volumes are important only up to a point and only if they are genuine, unlike those generated by badla and arbitrage. It is interesting to note that when badla was banned during 1994, the trading volume and liquidity became very broad-based indeed. Many developed markets do have stock options. The point to consider is whether the time is ripe for allowing individual stock options in India. I feel that it is a blunder to allow stock options in India at this juncture.
Stock options look simple and innocuous but are fraught with dangers in our conditions.
The people or the interest groups who are clamouring for stock options are business houses and market operators. Stock options will provide them a new handle for manipulating share prices. This is because options are themselves derived from the cash market. Improvements are, no doubt, needed in many institutional arrangements. In my opinion, the most important institutional arrangement needed to facilitate the transition relates to bank financing of stock market activities.