Starting 7th June, NSE moved the weekly expiry day for Bank Nifty futures and options from Thursday to Friday in response to BSE’s changes.
The reason for shifting Bank Nifty Expiry on Friday.
The NSE has changed the expiry day for Bank Nifty futures and options contracts to stay competitive. Starting from July 14, the expiry day will move from Thursdays to Fridays, bringing excitement for traders and investors.
NSE changed Bank Nifty’s expiry day to align with BSE’s introduction of weekly Sensex futures and options. NSE aims to align with BSE, offering traders a seamless experience and more trading opportunities.
As per NSE’s circular, Bank Nifty contracts, including weekly, monthly, and quarterly contracts, will now expire on Fridays. Bank Nifty derivatives are highly popular and traded, ranking second after Nifty contracts.
As a result of this adjustment, the National Stock Exchange (NSE) will introduce four weekly expiries. The revised schedule includes Fin Nifty on Tuesdays, Midcap Nifty on Wednesdays, Nifty on Thursdays, and Bank Nifty on Fridays.
Will these changes affect the Trading circumstances?
Bombay Stock Exchange’s (BSE) recent changes to options contracts, the National Stock Exchange (NSE) has made a strategic move. This adjustment aims to counter BSE’s popularity by offering a different expiry day and enticing traders to explore NSE’s offerings.
BSE launched weekly derivative contracts for Sensex and Bankex, aiming to expand its market share in India’s derivatives market. By introducing a Friday expiry, BSE aims to attract Nifty regular traders to try out Sensex contracts. The recent Friday expiry of Sensex contracts resulted in a significant turnover of Rs 69,422 crore in BSE’s derivatives segment.
NSE and BSE aim to attract more traders with changes in expiry days and lot sizes, offering increased options and flexibility.
How these sudden moves can help the Traders?
The Bank Nifty contracts exhibit a close correlation with the Nifty, making them a viable proxy for Nifty. The National Stock Exchange (NSE) seems to be hoping that traders will prefer the more liquid Bank Nifty contracts over the Sensex contracts introduced by BSE.
Experts anticipate that NSE’s decision will improve focus on each index and boost trading volumes for the two most popular indices in the derivative segment. This change is also in line with BSE’s Friday expiry.
Market observers anticipate that the shift to Friday expiry for Bank Nifty contracts will reduce volatility, particularly in the Nifty, by approximately 20% to 22%. This is because the components of Bank Nifty will be more actively traded on Friday’s expiry compared to the previous Thursday’s weekly expiry.
Additionally, this change in expiry day could provide traders with more flexibility in managing their margin money. Previously, traders had limited funds due to both Nifty and Bank Nifty contracts expiring on Thursdays.
Hence, market analysts anticipate that the introduction of the new Friday expiry for Bank Nifty contracts will improve trader focus, boost trading volumes, mitigate volatility, and provide traders with greater margin flexibility.
The Objective of moving it to Friday.
Initially,Bank Nifty’s weekly expiry was introduced to help traders hedge against risks and volatility related to events like RBI policy and FED meetings held on Wednesdays. The idea was to allow participants to offset their positions and manage their exposure within a shorter timeframe. However, with the shift in Bank Nifty’s weekly expiry to Friday, traders now need to maintain their positions for an additional two days to effectively hedge against the aforementioned events.
This change has implications for traders who previously relied on the weekly expiry to mitigate risks arising from policy announcements and market-moving events. They now have to adjust their strategies and consider a longer time horizon for hedging purposes. NSE’s Friday expiry extension aligns with market dynamics, enabling traders to better manage positions and respond to market developments.
Market participants need to recognize the impact of this shift and adapt their trading strategies accordingly. Traders can evaluate the impact of policy decisions and external events closer to the end of the trading week. The extended timeframe enhances risk management and flexibility in navigating market uncertainties.
To Sum Up:
In summary,Bank Nifty’s shift to Friday expiry gives traders an extra trading day for weekly and monthly expiries. The adjustment aims to boost liquidity and market volatility, aligning S&P 500’s monthly expiry with the last working day, Friday. BSE’s F&O contracts remain unaffected. Bank Nifty futures follow a three-month cycle, with new contracts introduced after the expiry of the near month.
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