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The introduction of daily derivative expiry could be a potential game changer for the F&O market

In the wake of the Covid-19 pandemic, a major wave of new traders, particularly in day trading, flooded the market. This influx has been a result of various factors such as technological advancements, the pervasive influence of social media, a growing financial awareness, and the expanding landscape of financial inclusion. Impressively, from March ’20 to September ’23, the total number of demat accounts nearly tripled, reaching a staggering 12.97 crore.

Beyond the surge in traders and investors, the introduction of daily expiries has resulted in a dramatic increase in short-term trading volume, with intraday options activity seeing a particularly sharp rise. This shift (option expiries) has led to an important adjustment in the expiration schedule of market contracts, resulting in a more diversified distribution of expiry days throughout the weekdays. While monthly and quarterly contracts have remained largely unaffected, the impact has been most pronounced in the domain of weekly contracts, which now witness higher volume and shorter holding periods.

Notably, Bank Nifty’s weekly contracts now expire on Wednesdays instead of the established Thursdays used for monthly and quarterly expirations. This change, implemented since October ’23, creates a daily expiry scenario offering traders with five distinct expiry days each week. The main goal is to diversify trading opportunities beyond traditionally robust contracts like Bank Nifty and Nifty, potentially spreading risks across different expiry days.