Your F&O Trades Might Be Stuck If You Don't Do This One Thing
Dec. 24 to Dec. 27 will be the last trading dates for index option contracts without revised lot sizes.
Due to the newly-introduced measures undertaken by market regulator Securities and Exchange Board of India, the new index option contracts have seen a revision in lot sizes.
Market participants, who have open positions on contracts drawn up before the new rules came into effect, may not be allowed to close them until the respective date of expiry, from Dec. 24 onwards.
Those who hold positions in Nifty Bank contracts with expiries on Mar. 26, Jun. 25, or Sept. 25 that don't match the new lot size, will not be able to close these positions after Dec. 24, and will be required to hold them until expiry, discount broker Upstox stated in a communication to its users.
Similar rules will apply for those holding positions in the Nifty 50 contracts, with Dec. 26 being the last trading date allowed for such contracts, and Dec. 27 for those holding Sensex contracts.
Due to the measures taken by SEBI, index option contracts witnessed an increase in lot sizes, along with each exchange being limited to one index contract with a weekly expiry.
The two measures came into effect on Nov. 20, where the Nifty 50 index options increase from 25 to 75, and Sensex contracts' lot size went up from 10 to 20. This also led to a proportionate increase in payable premiums required in order to execute such contracts.
However, contracts that were being traded saw no changes. This included those with expiry dates that may be months or years ahead.
The rule applies to new contracts, such as those for weekly, and monthly options, seen starting with an expiry date on Jan. 2, 2025 in the case of Nifty 50.
Upstox suggests two possible measures for investors to avoid holding contracts without the revised lot sizes:
1. Adjust positions by buying or selling contracts to meet the new lot size
2. Square off positions before the respective last trading dates
