India’s equity markets are buzzing with unprecedented retail participation, ushering in innovative trading products. Central to F&O trading is the expiry mechanism—weekly or monthly—that dictates when contracts conclude. If you’ve ever wondered why traders fixate on these dates, here’s a deep dive into their significance.
At its core, an F&O contract is time-bound. Expiry is the deadline; post that, it’s game over. Take a Nifty futures contract: buy it today with a Thursday expiry, and you must square off before or settle on that day. No extensions, no mercy.
Monthly expiries were the norm, aligning with the month’s final Thursday for a predictable rhythm. This suited swing traders eyeing multi-week moves. The shift to weeklies began in 2016 with NSE’s Bank Nifty launch, fueled by demands for faster cycles. Today, Nifty, Bank Nifty, and more follow suit, with all expiries now consolidated on Tuesdays—a pivotal NSE reform to curb volatility clustering.
Contrast the two: Weeklies pack intense action into days, amplifying price swings ideal for day traders and scalpers. Monthlies allow breathing room, favoring positional plays with lower theta decay pressure. Liquidity remains robust in benchmark indices, ensuring smooth entries and exits.
Expiry Tuesdays (formerly Thursdays) often ignite fireworks—massive volumes, pinning effects, and gamma squeezes. Institutions leverage these for sophisticated hedges, balancing portfolios amid uncertainty.
Retail folks, take note: Blind trading on expiry can be disastrous amid the frenzy. Pros recommend paper trading first, mastering Greeks, and starting small. Knowledge of these cycles isn’t optional; it’s your edge in the derivatives arena.