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Nifty Bank weekly expiry shifts to Wednesdays, boosting retail trading activity

EditorRachael Rajan
Published 2023/09/06, 15:22

The Indian stock market has undergone a significant shift as Nifty Bank's weekly derivative expiry moves to Wednesdays, effective from today, Wednesday. This change is part of a broader adjustment in the derivative expiry calendar that now features one expiry each trading day of the week, according to the National Stock Exchange (NSE).

Previously, option traders mainly focused on Thursdays, which were the weekly option expiry for two key indices, Nifty and Bank Nifty. However, with the new arrangement, every day is now a weekly expiry day, providing option buyers and sellers with multiple options to choose from.

With Nifty and Nifty Bank now expiring on different days, retail participation is expected to increase further, as traders can use the same capital or margin to trade Bank Nifty on Wednesday and Nifty on Thursday. This could lead to increased participation from day traders and swing traders looking to capitalize on short-term price movements.

Market data reveals that retail participation in cash segment turnover has declined while it has increased in index options premium. Retail traders now contribute about 35% of the turnover in index options premium compared to 22% in 2016.

For NSE, Nifty Bank remains the most popular derivative product contributing about 54% of turnover premium in July, followed by 29% in Nifty and 16% in Fin Nifty.

The shift in the Bank Nifty weekly expiry to Wednesday is expected to reduce volatility in Nifty on Thursday as most banking sector components would be actively traded the previous day. Traders suggest that volumes in both Nifty and Nifty Bank should increase as most volumes are reported on expiry days. With separate expiry days for both indices, individual volumes are likely to rise.

This change was announced back in July when the NSE decided to prepone the expiry of Nifty Bank option contracts from Thursdays to Wednesdays starting September 6. Monthly and quarterly contracts of the banking index will continue to expire on Thursdays. The split in expiry days between weekly and monthly contracts implies that for September, the first three expiries would be on Wednesday and the last one (monthly) would be on Thursday. If Wednesday happens to be a trading holiday, then the expiry day would be the previous trading session.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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