Nifty Bank expiry shifts to Wednesdays from tomorrow. Will it affect option trading strategy?
Nifty Bank option contracts to Wednesdays from this week, derivative contracts of Nifty and Nifty Bank will no longer expire on the same trading day.
Under the new rules, announced in July, Nifty Bank weekly index options will expire every Wednesday instead of Thursday from September 6. But for monthly and quarterly contracts of the widely-tracked banking index, there is no change and will continue to expire on the last Thursday of the expiry month.
The split in expiry days of weekly and monthly contracts would mean that in September, the first three expiries would be on Wednesday and the last one (monthly) would be on Thursday.
If Wednesday is a trading holiday, then the expiry day would be the previous trading session.
The change in expiry may lead to change in strategy for some option traders, especially those who trade Nifty and Nifty Bank ratio strategies.
“Things will change for those who trade the two indices individually as bank stocks have the highest weight in Nifty and the movement in Nifty Bank will affect the movement in Nifty as well,” said Sharekhan’s Jay Thakkar.
Considering the high weightage of banking sector stocks in Nifty, the shifting of the Bank Nifty weekly expiry to Wednesday is expected to reduce the volatility in Nifty on Thursday as most banking sector components would be actively traded the previous day.
“Moreover, from a capital standpoint, it would lead to higher trading activity as margins used on Wednesday’s Nifty Bank expiry can now be used for Nifty options expiry on Thursday. As the monthly expiry for both Nifty Bank and Nifty remains constant on Thursday, it would be interesting to see whether the market liquidity and volatility moves in tandem with the weekly expiries.
