New SEBI F&O Rules 2025: What You Need to Know

A derivative is a contract whose value comes from something else — an index, a share, a currency. That something else is called the underlying. In India the dominant derivative is the index option, and the turnover that made this the world’s busiest options market did not come from institutions hedging portfolios. It came from individuals buying cheap, short-dated contracts that expired within days. The regulator looked at the outcomes of those individual accounts before it looked at the products.

SEBI’s study of the equity F&O segment covering FY22 to FY24 found that roughly 93% of individual traders in the segment made net losses, and that their aggregate net loss across those three years came to about ₹1.8 lakh crore. That number is SEBI’s own published figure. It is not a win rate for any particular strategy and it says nothing about what any individual trader will experience. What it establishes is scale — a market that large, with that outcome distribution, becomes a household-savings question rather than a private one.

The regulator had blunt levers available and used none of them. It did not bar retail participation and it did not cap leverage directly. Instead it raised the cost and the friction of the specific behaviour the data pointed at: very small positions, held for hours, on contracts that expire the same week. Bigger contracts, fewer expiry days, premium collected before the trade, heavier margin on the session when a contract is most volatile. The market stayed open and stayed liquid.

Before the framework, an Indian trader could find an index expiring on nearly every day of the week. NSE ran weekly contracts on Nifty 50, Bank Nifty, Fin Nifty and Midcap Nifty; BSE ran Sensex and Bankex. Six weekly contracts across two exchanges meant the shortest-dated, fastest-decaying trade available was on the menu every single session. SEBI’s rationalisation cut that to one weekly index contract per exchange. NSE retained Nifty 50, BSE retained Sensex, and every other index moved to monthly expiries only.

The second half of the change is the expiry weekday itself. Under the 2025 framework each exchange settles its contracts on a single fixed weekday, and the two exchanges do not sit on the same day. Both exchanges have already revised their chosen weekday once since the framework was announced. Because it has moved before and can move again, confirm the current expiry day on the exchange contract specification page rather than from any article, including this one, before planning a position around it.

The practical effect on the screen is concentration. Everything that used to be spread across five weekly contracts now sits in one. Order books on the surviving weekly contract are deeper and the spread between bid and ask around the money is tighter. Instruments that lost their weekly contract are thinner in the near month, and a strike that once quoted a two-rupee spread may now quote far wider. Traders did not lose those instruments — they lost the short-dated version of them.

Lot size is the number of units of the underlying packed inside one contract, and you cannot buy half a lot. Contract value is simply lot size multiplied by the level of the underlying, and it is the number the regulator actually controls. Before the change, the minimum contract value for an index derivative sat in the ₹5 lakh to ₹10 lakh band. The framework raised that floor to a ₹15 lakh to ₹20 lakh band, and the exchanges reset lot sizes upward to comply. Nifty’s lot size moved to 75 units.

Put numbers on it. Suppose Nifty is at 24,500. One lot carries 75 × 24,500 = ₹18,37,500 of underlying exposure inside a single contract. If a call at some strike quotes ₹100, buying it costs 100 × 75 = ₹7,500, not ₹100. The premium on the screen is quoted per unit; the cash that leaves your account is per lot. Reading the per-unit premium as the size of the trade is the single most common arithmetic mistake a first-time options trader makes.

The margin side moves with contract value too. A short option position blocks margin calculated off the contract value, so raising the value floor raises the block roughly in proportion. Exchanges publish the actual requirement daily and it moves with volatility, so no fixed rupee figure belongs in an article. Lot sizes are also revised periodically as index levels drift, which is why the current lot size for whatever you trade should be read off the NSE or BSE contract specification page rather than remembered from last year.

Until this rule, an option buyer could sometimes hold a position larger than the cash sitting in the account. Brokers had to collect margin upfront from option sellers, but the premium payable by a buyer could effectively be funded intraday by the broker. A trader with ₹20,000 might carry a position whose premium outlay was several times that, provided it was squared off the same session. The framework closes this: the full premium must now be collected from the buyer before the order is executed.

The point is not the buyer’s maximum downside, which was always capped at the premium paid. The point is position size. Intraday funding let a small account carry more lots than it could actually pay for, and premium on a weekly option can halve within an hour. An account whose real balance was ₹20,000 could therefore lose more than ₹20,000 in a session and finish the day owing the broker. Requiring the cash upfront makes the maximum loss on a long option genuinely equal to money the account already holds.

The visible effect is that your available margin drops the moment you buy, by the full premium multiplied by the lot size, and does not return until you exit. Combined with the larger lot, a position that once consumed a fraction of a small account can now consume most of it. Traders who ran several simultaneous long-option positions on intraday funding found the same book simply would not fit — not because a rule forbade it, but because the cash had to be there first.

A calendar spread holds the same strike in two different expiries — short the near contract and long the far one, or the reverse. Because the two legs normally move together, margin systems treated the pair as largely self-hedging and blocked far less margin than the two legs would need standing alone. For most of a contract’s life that offset is an honest measurement of the risk actually being carried.

It stops being honest on expiry day. In the final session the near leg decouples completely: its time value collapses toward nothing and its sensitivity to a small move in the index goes vertical, while the far-dated leg barely reacts. The two legs are no longer a hedge — one is a live, violently convex position and the other is a slow one. SEBI therefore removed the calendar spread margin benefit where one leg expires that day, and the expiring leg is margined as though it were naked.

The consequence arrives as a sudden margin demand on the morning of expiry, against a position you have held unchanged for days. If the account cannot fund it, the broker squares off, and it squares off into an expiry-day order book where spreads on the near contract can be brutally wide. This is the same gamma behaviour covered in the expiry-day trading and gamma modules — the rule change simply forces the margin system to price it honestly.

Two further pieces of the framework are discussed less and matter more to sellers than to buyers. The first is an additional margin, over and above the normal requirement, applied to short option positions on the day they expire. The intent is to cover tail risk on the one session where a contract can travel from near-zero to several hundred rupees within minutes. The exact additional percentage is set out in the SEBI circular and applied by the clearing corporation — read the current number there rather than assuming it.

The second is monitoring. Position limits in index derivatives used to be verified at the end of the day, so a position could breach a limit intraday and be back inside it by the close. The framework moved this to intraday monitoring, with the exchange taking snapshots during the session. Alongside it, SEBI revised how open interest in index options is measured — away from raw notional and toward a delta-adjusted, future-equivalent basis, so a deep out-of-the-money option no longer counts the same as an at-the-money one.

For a retail account trading a handful of lots, neither limit will ever bind. They matter because they change what the aggregate open interest figures on the option chain actually represent, and because they change the behaviour of the large sellers whose positions dominate those figures. The effective dates and precise thresholds for both measures were phased through 2025 and are the parts of this framework most likely to have moved again since — take them from the current circular.

None of this makes derivatives safer for an under-capitalised account. It makes the minimum size of a serious position larger and the cost of carelessness more visible, which is a different claim. The arithmetic every trader now has to redo is cost per lot: what one lot of the instrument actually costs today, in premium if buying and in blocked margin if selling, at the current lot size and the current index level.

The second adjustment is planning around one weekly expiry per exchange instead of one on most days. An approach that depended on finding a fresh expiry every session no longer has the raw material. Positions in indices that lost their weekly contract now sit in the monthly, which decays more slowly and reacts less violently to a single move. That is a different risk profile, not a gentler version of the same one; the position sizing and risk-per-trade modules work through what that means for lot count.

The third is the expiry-day margin cliff. Any position with a leg expiring that day is best assumed to require full, unhedged margin on that leg from the morning session onward. The assumption costs nothing when it turns out to be unnecessary and prevents a forced square-off when it is not. The rest of the mechanics — SPAN, exposure margin and the benefit genuinely hedged positions still receive — are covered in the margin rules module.