Retail position in derivatives reaches excessive levels, says study

Retail positioning in the equity derivatives segment has reached excessive proportions. Similar positioning in the past has been a precursor of market weakness, reveals a study by IIFL Alternative Research.

Currently, retail open interest in index futures is about 153,000 contracts. In stock futures, however, about 1.11 million contracts — near historic peak levels.

Sriram Velayudhan, vice-president and head-alternative research, IIFL, says this is on the higher side and may lead to sharp swings in the market if there is major global sell-off. He says a similar positioning was seen before the pandemic breakout.

“We had