Revised Options Strike Criteria

There is an important update regarding options trading on our platforms. In this blog, we will cover the key changes that we will be implementing starting Tuesday, 3rd October, 2023, to provide better risk control in options trading. These changes are being implemented due to concerns about illiquidity, as they can cause losses to the clients.

Change 1: Strike Range:

We have disabled options strikes that are far away from the underlying price for all segments as explained below:

Exception for Equity stock options: The below stocks fall under the exception criteria of 15% strike range

Exception for Commodity Options: The below scrips fall under the exception criteria of 15% strike range

Let’s understand with the help of an example:

Example: Index (With the strike range of 15%) Assuming the current market price of Nifty is 20000. With a 15% strike range, you can trade in option strikes within the range of 17000 to 23000. Note: You can square off your existing open positions regardless of the allowed strike range criteria.

Change 2: Strikes with Zero Open Interest:

Strikes with Zero interest: What’s the change?

We've also made a change regarding strikes with zero open interest. These strikes will be disabled for placing orders on non-expiry days but will remain available for trading on expiry days.

Let’s understand this also with the help of an example:

Example: If the Open Interest (OI) of 19500 Nifty CE 23rd Oct 2023 as of 21st Sept 2023 is 0, the strike will not be allowed for the next trading day, i.e., 22nd Sept 2023.

Rationale behind the above Changes:

• Enhanced Liquidity and Reduced slippages: By focusing on strikes closer to the current market price of the underlying with open interest, we improve liquidity and reduce the risk of slippage and fat-fingering by disabling trading in less liquid strikes.
• Narrower Bid-Ask Spreads: Increased liquidity leads to narrower bid-ask spreads, reducing transaction costs for traders.

Conclusion: Elevating Your Trading Experience

These changes are part of our ongoing commitment to provide a safer, more efficient, and user-focused trading environment. By limiting strike ranges, our goal is to offer you a risk-optimized trading experience.

As always, we value your feedback and are here to address your questions. Please reach out to our support team for further clarification on these updates. We're dedicated to supporting your trading journey and helping you achieve your goals.

Happy and successful trading!

Disclaimer: Futures and Options (derivatives): Derivatives are a sophisticated investment device. The investor is requested to take into consideration all the risk factors before actually trading in derivative contracts.

Risk Disclosure on Derivatives

As per a SEBI study dated 25 Jan 2023

9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses. On an average, loss makers registered net trading loss close to ₹ 50,000. Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs. Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.