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

A derivative is a contract whose value comes from something else, such as an index or a share. That other thing is called the underlying. Index options became very popular with individuals because a small premium buys a contract that can change value within hours. That same speed is what makes the loss rate high.

SEBI’s earlier study (FY22 to FY24) reported that about 93% of individual traders in equity F&O had net losses, totalling about ₹1.8 lakh crore over three years. The newer study, “Profitability of Individual Traders in the Equity Derivatives Segment (FY25–FY26)”, published in August 2026, reports that 87.7% of individual traders made a net loss in FY26 (90.9% in FY25), with aggregate net losses of ₹91,685 crore, down 18% from a revised ₹1.12 lakh crore in FY25. Active individual traders fell from 106.2 lakh to 87.5 lakh, the first yearly fall since FY16.

Read the figures fairly. Fewer people traded and total losses fell, but the average loss per person rose about 2%, from ₹1.13 lakh to ₹1.17 lakh. About 23% of traders accounted for nearly 90% of losses, and options were 92% of individual losses. On the other side, 12.3% of individuals did not make a net loss. And the study cannot say how much of the change came from the new rules and how much from market conditions.

SEBI did not bar individuals and it did not cap leverage directly. It raised the cost and friction of the behaviour the data pointed at: small positions held for hours on contracts that expire within days.

Weekly options are contracts that expire within a week. Before the change an exchange could offer them on several indices, so a trader could find a contract expiring on almost every weekday. SEBI’s circular of 1 October 2024 said each exchange may offer weekly contracts on only one benchmark index, effective 20 November 2024. NSE kept Nifty 50 and BSE kept Sensex. Bank Nifty, Fin Nifty, Midcap Nifty and Bankex moved to monthly expiries only.

The expiry weekday was also fixed. SEBI’s May 2025 circular required each exchange to choose Tuesday or Thursday. Press and broker reports say that from 1 September 2025 NSE expires on Tuesday and BSE on Thursday. Weekdays have been changed before and can change again, so read the current day on the exchange contract page.

Think of a market that used to hold five auctions a week and now holds one. The crowd gathers at one auction, so the surviving contract is deep and its bid-ask spread is tight. The contracts that lost their weekly version are thinner near expiry, and wide spreads there can cost more than the trader expects. On the positive side for regulators, SEBI’s study reports that the share of index options turnover on expiry day fell from 70% in FY25 to 59% in FY26. On the negative side, most turnover still sits near expiry.

Lot size is the number of units packed in one contract. You cannot buy half a lot. Contract value is lot size times the price of the underlying. Think of a wholesaler who raises the minimum order: smaller buyers must either buy a bigger pack or stay out.

SEBI’s circular set the minimum contract value for new index derivatives at ₹15 lakh at introduction, and told exchanges to fix lot sizes so that value stays within ₹15 lakh to ₹20 lakh on the day of review. The earlier band was ₹5 lakh to ₹10 lakh. Exchanges revise lot sizes as index levels move: NSE’s Nifty lot moved to 75 and was then revised to 65 from the January 2026 series (NSE circular FAOP70616). Confirm the current lot before you calculate.

Example (illustration): Nifty at 24,500 and lot 65 gives 65 x 24,500 = ₹15,92,500 of exposure, inside the ₹15–20 lakh band. A call quoted at ₹100 costs 100 x 65 = ₹6,500, not ₹100. The premium on the screen is per unit; the cash that leaves your account is per lot. The bigger contract cuts both ways: it raises the cost of carelessness, and it also raises the profit or loss from the same move.

Think of a token advance on a flat: you pay before the builder blocks the unit. SEBI’s rule works the same way for option buyers. The circular says the net options premium payable must be collected upfront by the broker, so that intraday positions cannot exceed the collateral in the account. The circular gave 1 February 2025 as the start; exchanges and brokers implemented it in February 2025 (one source reports 10 February; confirm with your broker).

Earlier, a buyer could sometimes hold more premium during the day than the cash in the account, if it was squared off the same day. That let a small account carry large positions, and a weekly option premium can halve within an hour. Now the maximum loss on a long option is money already in the account. The premium leaves your available margin when you buy and returns only after you exit.

There is a benefit and a cost. The benefit is that a buyer cannot lose more than the money they have already paid. The cost is that fewer lots fit in a small account, and your capital is tied up for the trade. Note that it does not slow down how fast the premium can fall.

A calendar spread holds the same strike in two expiries: sell the near one and buy the far one, or the reverse. Margin systems treated the pair as partly hedged, because the two legs usually move together, and blocked less margin. It is like counting two umbrellas as protection when it rains on both sides of the road.

On expiry day, the expiring leg behaves very differently from the far one. Its time value collapses and it reacts sharply to small index moves, while the far leg barely reacts. SEBI’s circular of 1 October 2024 therefore said that from 1 February 2025 the calendar-spread offset is not available on the day of expiry for the contracts expiring that day, for index derivatives. On 5 February 2026 SEBI extended the same treatment to single-stock derivatives, effective three months after the circular.

For the trader, a spread carried unchanged for days can need much more margin on the morning of expiry. If the account cannot fund it, the broker may square off, often into a thin expiry-day book. The rule protects the system from a hedge that stops being a hedge, and it can catch traders who did not plan for it.

Two more measures matter mainly to sellers and large traders. The first is an additional Extreme Loss Margin (ELM) of 2% of contract value on short option positions on the day they expire, both those open at the start of the day and those opened that day (SEBI circular of 1 October 2024, effective 20 November 2024). Think of a shopkeeper who asks for an extra deposit when a fragile item is about to be delivered.

The second is monitoring. Position limits for index derivatives were checked only at the end of the day. Since 1 April 2025 exchanges also check them during the day, with at least four random snapshots. In September 2025 SEBI added entity-level intraday limits for index options on a future-equivalent (delta) basis: net ₹5,000 crore and gross ₹10,000 crore, from 1 October 2025. End-of-day limits are net ₹1,500 crore and gross ₹10,000 crore after a glide path to 6 December 2025.

A small retail account will not reach limits of thousands of crores. The rules matter because they shape the behaviour of the very large participants whose positions drive much of the open interest you see on the option chain. Limits and dates can be amended, so read the current circular.

None of this makes derivatives safer for an under-capitalised account. It raises the smallest serious position and makes the cost of carelessness easier to see. So the first task is to redo the sums: the cost of one lot today, in premium if buying and in blocked margin if selling.

The second is to plan around one weekly contract per exchange. A method that needed a fresh expiry every day now has less to work with. A monthly contract decays more slowly and reacts less to a single move. That is a different risk profile, not a safer version of the same one.

The third is expiry-day margin. Assume any leg expiring that day may need full unhedged margin from the morning. Assuming it costs nothing if it turns out unnecessary. Also keep the human side in mind: less friction from a rule does not remove the emotional pressure of fast-moving contracts.