The decision by the National Stock Exchange (NSE) to change the weekly and monthly expiry day for Nifty contracts from Thursday to Monday is expected to have implications for options traders.
Traders who write options contracts a day before expiry currently face overnight risk, but with the shift to Monday expiry, they will now have to contend with weekend risk instead. This change may lead options sellers to demand higher premiums, potentially affecting options volumes as buyers may be reluctant to pay more. Additionally, algo traders will need to adjust their strategies and models to account for the new Monday expiry.
The move has raised concerns about increased risks, as traders will now need to factor in global events over the weekend that could result in unexpected market movements. This could make the markets more unpredictable and complicate risk management for traders.
Exchanges have been reshuffling their expiry days in an effort to attract more business. BSE has been gaining market share, while NSE’s share has either remained stagnant or declined slightly. The shift to Monday expiry may help NSE attract some of BSE’s Monday business, prompting speculation about whether BSE will respond by changing its expiry day as well.
No SEBI approval is required for changing the expiry day, and the move is based on market feedback. The historical Thursday expiry day for Nifty is being changed for the first time, and NSE remains open to considering other feedback from market participants in the future.
Overall, the change in expiry day is expected to have a significant impact on options premiums and trading dynamics, with traders and market participants needing to adapt to the new normal in the coming weeks.
