THESE STEPS OF NSE WILL CHANGE DERIVATIVE TRADING; LET US KNOW IN THIS ARTICLE WHICH STEPS OF NSE WE ARE TALKING ABOUT
The National Stock Exchange (NSE) is going to take new steps to further strengthen derivative trading. The National Stock Exchange (NSE) has announced changes in the market lot size of derivative contracts of several indices. These changes will come into effect from 25 April 2025
This will definitely impact traders doing options trading or futures trading in Bank Nifty and Nifty Mid Select Index.
What will be the lot size of BANKNIFTY and Midcap Nifty?
In a note issued on 28 March 2025, NSE said that the lot size of the Bank Nifty index will increase from 30 to 35 and the lot size of the MIDCAPNIFTY index will increase from 120 to 140. There will be no change in Nifty 50, Nifty Financial Services, and Nifty Next 50 indices
From which date will the lot sizes of derivative contracts be changed?
The changed lot size rule will come into effect from the July 2025 expiry. There will be no change in contracts for the April, May, and June 2025 expiry. Quarterly contracts which are available will undergo a change in lot size from April 25, 2025
WHAT ARE DERIVATIVES TRADING?
Derivatives are a type of financial contract that is extracted from the underlying asset. Derivatives are traded in stocks, indexes, commodities, and currency. 2 forms of derivatives are futures and options (F&O).
Traders trading in derivatives detect the price movement of the underlying asset. Traders have to pay more margins to trade in futures, but the margin in options trading seems less
*Margin in derivatives trading means how much minimum money the trader will have to pay for trading a lot.
What does lot size mean in derivative trading?
In derivatives trading, lot size refers to the minimum number of units. A trader must buy or sell a predetermined number of units. Lot size is always decided by the exchange. Since derivatives are leveraged instruments, traders do not have to pay the contract’s full value upfront, but the lot size determines their exposure and the margin required.
Let us understand lot size with the help of an example
The reliance lot size is 50, and Reliance stock is trading at Rs 1000 right now, so a trader will have to pay Rs 1000*50 = Rs 50,000 for one contract.
In options trading this amount will be less because in options trading the premiums of call and put are less.
Suppose the price of 1000 call of Reliance stock is running at Rs 50; then the trader has to pay only 50*50= Rs 2500.
In options trading, you can trade with very little money; hence options trading is very popular among traders.
Conclusion
SEBI has been working a lot in the derivatives segment for some time now. There is a lot of speculation in derivatives trading, due to which small traders suffer huge losses. Recently, a report from SEBI came out that said that 90% of traders waste money by trading in futures and options.
Gradually, SEBI is tightening the rules for trading in derivatives. For example, till 2 years ago, all brokers used to give up to 20% leverage for trading in options, due to which options traders used to invest more money, and they used to incur more losses.
But SEBI stopped the system of leverage, and now no broker gives leverage in options trading.
SEBI is taking many more steps so that derivative trading can run smoothly and traders do not incur much loss. Reducing or increasing the lot size of index contracts is also a step in the same direction.
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