On March 4, 2025, the National Stock Exchange of India (NSE) announced a change in the expiry day for weekly Futures & Options (F&O) contracts, shifting it from Thursdays to Mondays. The weekly derivatives contracts of the Nifty index will follow this new expiry day with effect from April 4, 2025, which also marks the beginning of the new fiscal year.
The NSE expiry day change will also apply to the monthly, quarterly, and half-yearly contracts, which will now expire on the last Monday instead of the last Thursday of the expiry month. This decision will significantly affect the related indices, too, namely, Nifty 50, FinNifty, Bank Nifty, Nifty Midcap Select, and Nifty Next50. The contracts will undergo revisions per the latest circular on April 3, 2025, for the shift in the expiry day.
What Caused this Shift?
The announcement from NSE came following the shift in the expiry day announced by the Bombay Stock Exchange (BSE). BSE’s weekly expiry volume for Sensex has been increasing rapidly, influencing the exchange’s market valuation and causing frequent instances of re-rating. By shifting the expiry day to Monday, NSE might crack some futures trading shares. In short, the motive behind changing the expiry day is to reduce competition and standardise the entire process, enhance market efficiency, and provide greater clarity to the market participants.
The effects of the NSE expiry day change are clearly visible with BSE shares plummeting to 9% as soon as the NSE announced the shift in expiry days.
What Traders should Expect out of this Shift?
With this announcement, traders might experience some changes in trends, including the:
- Trading volume: While earlier, traders witnessed fluctuations in the market in the middle of the week, they will be experiencing the same right at the beginning of the week.
- Liquidity levels: Traders who have been completely relying on the midweek expiry day might witness some liquidity shifts due to this change announced by the NSE.
Thus, traders must expect to work on their existing strategies and improve the same based on the NSE expiry day change from Thursdays to Mondays.
How will this Shift Affect F&O Contracts?
The Indian stock exchange has a fixed expiry date for every F&O contract that investors agree to. This expiration date, which used to fall on a Thursday earlier, will be falling on Monday from any contracts being signed on and after April 4, 2025. For weekly contracts, it would be the Monday of the expiry week, while for monthly contracts, the expiry day would be the last Monday of the expiry month.
What Happens when the Expiry Day Shifts?
Futures and Options (F&O) contracts belong to the derivatives market, involving financial instruments ranging from stocks to commodities to currencies. Futures and options contracts involve two parties agreeing to buy and sell securities at a predetermined price on a future date. While the futures contract is legally binding and makes the parties involved abide by what they agree to, the options do not make this agreement an obligation for the parties involved.
Now, this predetermined date, as mentioned above, is the Nifty derivatives’ expiry day, which has been shifted for Nifty indices by the NSE.
Let us now check how the F&O expiry impacts the different instruments that investors deal in:
Options Contracts
As the options contract is not an obligation for either of the parties, the contract simply ends on the expiry date if the agreement is not fulfilled. The seller of the contract, in such a case, forfeits the premium that the buyer pays towards the contract.
However, the expiry date has a significant impact on the pricing of the options. The time value of the options decreases significantly as the expiry date of the contract nears. This phenomenon is termed time decay. In the event of time decay, the value of the options in question decreases even if the value of the underlying asset remains the same. This change in value is significant enough to make investors incur huge losses.
Moreover, this time decay leads to market volatility as the price fluctuation related to the options is huge when its expiration date is around the corner. Thus, the traders must work on their trading strategies and ensure controlling Nifty options trading efficiently and managing risks wisely, considering the expiry date.
Futures Contracts
The futures contracts are legally binding obligations for the parties involved. Hence, expiry date is an important factor, be it weekly or monthly. The seller has to sell the securities or assets in question before the contract expires and the buyer has to ensure making all the required payments by the expiration of the contract.
There are two ways of handling these contracts wisely within the date of expiry :
- The parties can opt for a cash settlement or physical delivery. Here, the buyer needs to pay cash for closing the futures contract before the expiry date/day. For example, if you signed a futures contract to buy 500 shares of a company, which is currently priced at ₹50 each but you get it for ₹30 each because of signing the contract, you must pay ₹15,000 in total to settle the contract before the expiry date.
- The parties can buy another contract to nullify the earlier one on the day the previous contract expires. For example, if you were earlier in a contract to sell 500 shares of a company, which was priced at ₹50 each, you could nullify it by engaging in another contract and selling the same number of shares priced at ₹70 each. However, in this case, you must pay the differential amount of ₹1,000 towards the contract.
This is how the shift in expiry date would affect those who have planned it strictly based on the days fixed for contract expiration. If you are one of them, making trading strategy adjustments is highly recommended.
Conclusion
NSE expiry day change might be an opportunity for the stock exchange to regain its position in the market by stabilising competition and streamlining processes, but the traders in the market have to be alarmed, given the changes and challenges the announcement is going to bring. With the change in the expiration date of the F&O contracts, stock price fluctuations and sudden changes in the market trend towards the beginning of the week or month would be a normal phenomenon.
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