Nifty F&O contracts: Lot size revised to 50 from July 2021

The size of Nifty contracts is being revised from 75 to 50 per lot in the following manner:

  1. All monthly expiry contracts starting from the July expiry contract will have a lot size of 50. The Nifty July contract starts trading from 30th April. The April, May, and June contracts will continue to have a lot size of 75.

  2. All weekly expiry contracts from August will have the revised lot size of 50.

  3. After the June expiry, the Nifty long-term options contracts (where the expiry is greater than 3 months) will be revised from the current lot size of 75 to 50. The average closing price of Nifty (cash) will be taken to adjust the contract value.

Alternatively, the exchange may do an M2M settlement for the 25 units being reduced from the lot size. The additional 25 units will be settled in the June month expiry in the M2M settlement normally and will not roll over to the next day.

For example, you hold 1 lot Nifty Sep long CE option at 11900 strike. Nifty opens at 11900 on the last Thursday of June and closes at 12000. You get 25 x 100 = Rs. 2500 M2M settlement EOD. Next day your lot size becomes 50 and settlement happens normally on contract expiry.

The exchange may either do this ^ or change the strike price to price in the lot size change (in case of OTM options).

[We’ll update this post once we get the confirmation from the exchange.]

Update [24th June 2021]:

The lot size of all existing NIFTY long term options contracts (having expiry greater than 3 months) shall be revised from 75 to 50 after the expiry of June 2021 contracts (i.e. June 24, 2021). If you hold a position in a Nifty options contract, you will not be able to completely exit it unless you change your position to multiples of 50. Learn more.

Read this circular from NSE for more details.

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Is required margin will be reduced for option Selling and hedge strategy ?

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Since the contract value will be lower, it will also reduce the F&O margin requirement for each Nifty lot.

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Reason?

What is this mean?

Contract value for derivatives has to be between 5 lakhs to 10 lakhs, if value is below or above these values, there is revision in lot size. This revision is done periodically.

At current levels contract value for Nifty is around 1100000.

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The strikes of the existing longterm option contracts would be adjusted by the exchange.

Why?

Since changing only the lot size of existing contracts will affect positions already held at the 75 lot size.

What will the calculation look like?

We’ll share it here once released by the exchange.

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I think they will settle extra 25 shares as cash settlement against the counterparty.

This will be the simplest way to do the settlement. The exchange should announce it over the next month or so.

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I have sold nifty dec 18000 CE at rs 200
I have sold nifty dec 14000 pe at rs 100
What will be affect when lot size change , please explain calculation
@Bhuvan @ShubhS9 @nithin

Exchange directions are awaited regarding this matter


The last time a similar scenario occurred in Nifty (aka revision of market lot size), the only method available was to change the position’s size to match with the new lot size multiple otherwise hold the position till its expiry if not squared off -

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will it impact the profit of option writers??? because the lot size is decreasing

I bought dec month contract lot size is 75, i sold 50qty now holding 25qty. What i do further? Kindly assist. Thanks!

The lot size for all long-term Nifty contracts has been revised to 50 from 25th June. You can only square-off your positions in multiples of 50 any remaining position in the contract will be considered an odd lot. You will not be able to exit these odd lot positions, and these will be settled by the exchange at expiry. More details here.