BSE's new F&O expiry cycle will help ease volatility and free capital, say experts

BSE's new F&O expiry cycle will help ease volatility and free capital, say experts

With BSE changing the expiry days of derivative contracts of Sensex, Bankex and Sensex 50 from January 1, market participants believe that the new format would free up capital while also leading to lower volatility.

In a circular issued on Thursday, the exchange said that from the next year the weekly contracts of Sensex will expire on Tuesday instead of Friday, which is the norm currently. Further, all the monthly contracts of Sensex, Bankex and Sensex 50 will expire on the last Tuesday of the month. Currently, the expiry days for the same are the last Friday, Monday and Thursday, respectively.

Market participants say that since the expiries were concentrated on consecutive days -- Thursday and Friday -- capital of traders was tied up for longer periods, limiting their ability to reinvest or trade on other days. Nifty50 weekly contracts expire every Thursday.

Changing the expiry day to Tuesday will help traders free up their capital earlier in the week, providing them greater flexibility to deploy funds and engage in more trading activities across the rest of the week, said Priti Chabra of Trade Delta.

“The change of expiry to Tuesday will provide equal trading opportunities for option traders in Nifty and Sensex apart from helping them mitigating risks effectively by reducing risks of expiry concentration towards the end of the week, which could have even led to increased volatility going into the weekend,” said Sudeep Shah, Head of Technical and Derivative Research at SBI Securities.

In a similar context, Anshul Jain, Head of Research at Lakshmishree, said that traders must adjust their strategies to prevent disruptions, while institutions will need to recalibrate operational processes. The move to spread out expiries is aimed to reduce the speculative pressure and liquidity crunch associated with simultaneous contract expirations, he added.

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