SEBI's New Rules Impacting Futures and Options Trading A new SEBI circular introduces six significant rules affecting futures and options trading. Most traders, particularly option buyers, will feel the impact of these changes aimed at reducing losses in a market where 95% of participants typically lose money. The successful minority are often sellers or algo traders who employ systematic strategies to profit from this zero-sum game.
Increased Contract Sizes Raise Risk Levels The first rule increases contract sizes for F&O trades significantly; Nifty’s lot size may rise from 25 to as much as 75. This change means that both buyers and sellers must commit more capital upfront, potentially leading to larger losses for those already struggling with buying positions due to increased risk exposure.
Transition From Daily To Weekly Expiries Enhances Market Structure Weekly expiries replace daily ones across exchanges like NSE and BSE, aiming for better volume management while minimizing manipulation risks associated with rapid theta decay in options pricing. Traders can expect structured expiry days which could lead them into strategic planning around specific indices rather than random day-to-day fluctuations.
Stricter Regulations Aim To Protect Investors Additional measures include an Extreme Loss Margin (ELM) requiring extra collateral on expiration days along with stricter monitoring of intraday position limits by brokers. Buyers now face mandatory upfront fees instead of relying on collateralized shares when purchasing options—further tightening regulations designed to protect investors against excessive risk-taking behavior during volatile periods.