F&O expiry on Tuesday or Thursday? Here’s why the trading day matters

On May 26, SEBI issued a circular instructing exchanges to apply for their preferred weekly expiry day — either Tuesday or Thursday — by June 15. The move aims to standardise the weekly options calendar and reduce excessive, speculative churn that had built up around fragmented expiry schedules.

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Capital market regulator Sebi recently clarified that all derivatives contracts should expire either on Tuesday or Thursday, and while it may appear that the trading day does not make much of a difference, experts have said that it could influence liquidity, hedging patterns, and exchange-level flows as well.

While both expiry days offer five trading sessions on paper, market participants see it differently.

“Options activity doesn’t pick up evenly through the week. Monday trades are shaped by weekend risk and global cues, which makes them more cautious. Friday, Monday, and Tuesday become the real strategy window for a Tuesday expiry,” said one derivatives strategist.

This assumes significance as most options traders - especially large institutions - build positions around expiry of contracts, and with each passing day, options lose time value - known as theta decay - which accelerates as expiry nears.

“More trading days before expiry mean more time for theta to play out - and more premium to capture for sellers,” the strategist explained. That’s an edge, especially for option sellers. For buyers too, the additional session could help manage directional bets better, as the contract has more time value embedded before expiry.

As market experts point out, the exchange that gets Tuesday as its expiry will effectively have three trading days in that options cycle - Friday, Monday, and expiry-day Tuesday. In contrast, a Thursday expiry offers only two sessions - Tuesday and Wednesday - before the contract lapses.

Further, Thursday expiries are tighter - shorter in life, faster in decay, and less forgiving. “You lose the Friday session altogether,” said a trader from a large proprietary desk. “That changes how you position yourself as strategies become more compressed and volatile,” he added.

On May 26, Sebi had issued a circular instructing exchanges to apply for their preferred weekly expiry day - either Tuesday or Thursday - by June 15.  The move aims to standardise the weekly options calendar and reduce excessive, speculative churn that had built up around fragmented expiry schedules.

The biggest shift, however, is for traders. Popular expiry arbitrage strategies - building offsetting positions across NSE and BSE’s staggered calendars - will no longer be feasible. “Earlier, there was loose focus, with positions building purely because of staggered expiries. This move reduces noise in the system. Now, it’s more levelled,” said Rohit Srivastava, Founder of IndiaCharts. Read More

Some experts believe the expiry crowding could spike intraday volatility in the short term, as larger positions unwind over fewer days. But the long-term impact may be smoother, with cleaner price discovery and more directional trading.

“Speculative trades driven by scattered expiry setups will fade. What remains is more structured, directional participation,” Srivastava added.

Brokerages, meanwhile, may remain revenue-neutral. Since overall options volumes aren’t expected to shrink but just reallocate, the fee pools should remain steady. In fact, some believe brokerages may benefit in the near term.

“Brokerage revenues may actually rise in the short term,” said Hardik Matalia, Derivatives Expert at Choice Broking. “Sebi’s goal is to clean up expiry-day speculation and drive more disciplined participation,” he added.

“The money doesn’t leave the system; it just reorients,” said Sudeep Shah, Deputy Vice President – Head of Technical Derivative Research at SBI Securities. He added that retail-focused brokers won’t lose and traders will adjust, and activity will stabilize.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.