Currently, options contracts in India are essentially short-term products. For the individual stocks, you have 1-Month, 2-Month, and 3-Month expiries. Even in this classification, the volumes are very aggressive only in the near options. The Nifty and Bank Nifty offer options up to 9 months in the form of 3 quarterly options to traders. Long term options on the Nifty have liquidity up to December 2026, but not beyond that. However, we do not have long-term stock options, and that is what SEBI is now planning. 

The CBOE introduced Long term Equity Anticipation Price Securities (LEAPS) in 1990 and they have really taken off in a big way since then. This allows investors to take a 1-year to 3-year view on any stock with the help of options. There are several advantages for the investor in using options. Firstly, they get leverage benefits, without taking financial risk. Also, they can take a much larger stock position than they can afford in cash, as only the premium has to be paid. Above all, the loss of the buyer of the long-term option is limited to the premium paid, which helps to anticipate better. 

One must remember that the majority of the participants in the options market in India are the retail traders. They do not fully understand the nuances of the options market. When you buy 1-month call or put option, your cost may be 1% or 1.5% of the price. That is a risk that the small trader can afford to take. But, when you take a 1-year or 2-year stock option position, your option cost itself will be closer to about 15% to 20%. It means that in a worse case scenario, the trader can lose up to 15% of their capital. The bigger problem is that it is leveraged, so people normally take up positions, they cannot afford in cash. This only amplifies risk to the buyer. 

The much bigger challenge would be how the longer-term options will get priced. If the option sellers manage to form a syndicate and set steep prices for the option buyers, then the whole idea of long-term option buying gets defeated. Capital depletion in long-term options is much more rapid than in regular short-term options. But, the big question; will there be enough counter-parties to the trade. Today, we struggle to get counter-parties for a 3-month options contract, so it is hard to imagine who would be keen to offer a decent price on long–term options. Unless the counterparty is available and fair, long-term options market cannot work!