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What Will Happen When The Nifty Bank Lot Size Will Reduce From 25 To 15

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The bank nifty lot size will change to 15 from 25 and even the expiry day is changing. Read the details below.

BANKNIFTY Futures and Options expiry day is changing from THURSDAY to FRIDAY.

NSE (National Stock Exchange) has not given any reason for this but I feel they want to finish the weekly FnO contracts on the last working day of the week.

Please note that even though they are known as weekly contracts they start trading much before the start of the week. This means that technically an option expiring next week should start trading from the expiry day of the previous week, but they start trading before that.

So what will happen to the current contracts that are set to expire on Thursday?

Nothing to panic about – they will expire on Thursdays only until Thursday, 6th of July 2023. This will be the LAST Thursday expiry of Banknifty Futures and Options contracts. From next week the Banknifty options and future contracts will expire on Fridays.

The first FRIDAY expiry will be on FRIDAY 14th of July, 2023.

After the market closes on Thursday, 6th of July 2023, all contracts will show the expiry date as Friday of that week not Thursday. This means on Friday, 7th of July 2023, when you log in to your trading account you will see all bank nifty futures and option contacts showing the expiry date as Friday, not Thursday.
There is no other change. So there is nothing to panic.

Now coming to the banknifty lot size. Currently, it is 25, however, the lot size of banknifty futures and options is reducing to 15 from 25 now.

All contracts expiring after July 1, 2023, will have the lot size of 15.

Please note that when the lot size changes margin also changes as per the size of the lot.

See how with the change in the lot size, the margin of banknifty futures and option selling will reduce.

Here is the difference – margin calculation done in June 2023:

Current lot size 25 – Future / Option selling margin required: 1,47,032.00
All contracts expiring after July 1, 2023 – lot size 15 – Future / Option selling margin required: 88,668.00
Margin calculator used: ZERODHA

I think this is done mainly to increase the participation of derivatives traders of banknifty.

On one side the market makers try to reduce the retail traders from entering the derivatives markets, on the other side, NSE does tricks to get more retail traders to trade. Not sure what exactly they want.

Anyway, all I can do is remind you to is to trade safely and carefully. Learn to hedge and respect your stop losses.

What will happen when the Bank Nifty lot size will reduce from 25 to 15:

1. It will bring liquidity to the market.

2. The selling margin will reduce from Rs 1,40,000 to Rs 85,000. This is 40% less. So some of the experienced traders will become sellers, who were buyers till June 2023.

3. There are a lot of traders who still do not know that if you hedge then the margin gets reduced for selling options and trading futures plus it also reduces the losses. These sellers will increase the number of Nifty Bank lots sold, compared to what they were selling now when the lot size is 25.

4. Then you have some I-am-very-smart-trader thinking type of traders who know that hedging reduces the losses plus the margin required but still do not hedge because they think they can never go wrong. These people will sell more than they are selling now as they will have more cash in hand.

5. High liquidity brings down the volatility in the markets. This will decrease India VIX and bring down the option premiums of both Index – Nifty and Bank Nifty. This is good news for my course customers – the success rate of strategy 1 will increase from 70% to 80%.

6. Option buyers will lose less due to decreased lot size but their loss percentage will increase.

7. Risk management will become easier as traders with 3-4 lakh cash will have extra money now to mitigate risk. Though trying in vain to save loss in a losing position results in more losses.

8. I feel a reduction in lot size in Nifty will also follow suit.

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{ 4 comments… add one }
  • Suchit Agarwal June 23, 2023, 4:56 pm

    That’s really informative, I would like to know more about trading strategies.

    Suchit Agarwal

    • Dilip Shaw June 23, 2023, 9:01 pm

      >> That’s really informative
      Thanks, Suchit.
      >> I would like to know more about trading strategies
      Suchit I have sent you an email kindly check.

  • radhakrishnan nagarajan June 23, 2023, 6:23 pm

    This is really a good article.

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