This article summarises SEBI's October 2024 circular and reporting on it, in our own words. The source is credited under "Sources & credits" below. Rules change; always check the latest circulars and your broker's notices. Nothing here is investment advice.
On 1 October 2024, SEBI issued a circular with measures to strengthen the equity index derivatives framework. The changes were phased in between November 2024 and April 2025. Together they changed the economics of many short-dated index option strategies.
The six measures
1. One weekly expiry per exchange (from 20 November 2024). Each exchange may offer weekly expiry contracts on only one of its benchmark indices. NSE kept weekly contracts on Nifty 50 and BSE kept them on Sensex. Weekly contracts on other indices, such as Bank Nifty, were discontinued.
2. Larger minimum contract size (from 20 November 2024). The minimum value of an index derivatives contract at introduction rose from ₹5–10 lakh to ₹15 lakh, and lot sizes were revised to match. Exchanges review lot sizes periodically, so check current lot sizes before sizing a strategy.
3. Extra margin on expiry day (from 20 November 2024). An additional Extreme Loss Margin of 2% applies to short option positions on the day they expire.
4. Option premium collected upfront (from February 2025). Brokers must collect the full option premium from buyers upfront, with no intraday leverage on it.
5. No calendar spread benefit on expiry day (from February 2025). Positions where one leg expires that day no longer get the reduced calendar spread margin.
6. Intraday monitoring of position limits (from April 2025). Exchanges check position limits several times during the day, not only at the close, and penalties for breaches apply intraday too.
What this means for strategy design
Fewer expiries means fewer setups. Strategies built around trading a different index's weekly expiry almost every day lost most of their opportunities. Research that assumed daily expiries has to be re-run on the new calendar.
Bigger lots change position sizing. A larger contract means coarser sizing. A small account may no longer be able to size a multi-leg position precisely, which affects risk per trade.
Expiry-day selling costs more capital. The extra 2% margin on short options on expiry day raises the capital needed for expiry-day option selling, which lowers return on margin even if the trade itself is unchanged.
Backtests must use the rules of the day. A backtest that applies today's lot sizes and margins to 2023 data, or 2023 rules to today, gives a misleading answer. Good backtesting engines model the rule set in force on each date.
Sources & credits
- Business Today, "After Sebi's new F&O rules, BSE discontinues weekly index derivatives contracts on Sensex 50, Bankex", 3 October 2024. Read it
The rules are SEBI's, and the reporting belongs to its author. This post summarises them in our own words and adds our own commentary.