Abstract:
Risk is a characteristic feature of stock market in general and option market in particular. Indian option
market has grown very fast during last one decade. According to report of SMC Global Securities, in
financial year 2011 the volume generated by options market is almost two times that of the volumes
generated in the cash market and futures market put together. The fact is that simply selecting best of the
option strategies does not help investors to minimize risk. Therefore, due care should be taken while
selecting strike price, expiration date and premium rates. So, investors need to develop risk management as
well as risk analysis tool which is the key to limiting option risk. There are number of risk management and
analysis tools available, which help investors to take wise investment decisions. One of the popular tools
which is widely used by technical analyst is Exponential Moving Average Method (EMA) which helps to
predict future movement in stock price. If the option investor uses technical analysis as a means to select
option strategy and strike price then it possible to minimize risk and maximize profit on option trading. In
the backdrop of this a study has been conducted to find out the relevance of Exponential Moving Average
Method in Indian option market as means of risk management tool. The model developed by author has
helped investor to book profit on all the sample companies.
