SEBI New Rule, Futures and Options Trading: SEBI has decided to eliminate the calendar spread margin benefit on expiry day in single-stock derivatives…
highlights
- An important change has emerged for those doing derivative trading in the Indian stock market.
- This will have a direct impact on retail investors. Now more than ever, one has to be more cautious in expiry day trading.
- Now both retail and professional traders may have to rethink their trading strategy.
Now holding such positions will not only be costly but will also increase risk, forcing both retail and professional traders to rethink their trading strategies.
SEBI’s big decision
Market regulator SEBI has decided to eliminate the calendar spread margin benefit on expiry day in single-stock derivatives. This rule, which will come into effect from May 5, 2026, will not only make trading on the expiry day expensive, but will also increase the risk.
What facilities were available earlier?
Till now, if a trader sold the current month’s future of the same stock and bought the next month’s future (or vice versa), it was considered a calendar spread.
Since this was a hedged strategy, the exchanges did not treat the two as separate positions but as a single position and charged lower margins. This facility was available even on the day of expiry.
What will change for traders
Calendar spreads were considered a safe and low margin strategy till now. Contracts with different expiries balanced each other’s risks, so trading with less capital was possible.
After the new rules of SEBI, the picture will completely change on the expiry day –
- Full margin will have to be paid– Now full margin will have to be paid for holding calendar spread positions on the expiry day.
- Capital need will increase With the removal of margin benefit, trading will become more expensive than before.
- increased risk – As soon as one leg expires, the other position will become unhedged, which can lead to big losses on sudden price fluctuations.
- ban on margin shortfall This step will reduce the risk of sudden margin calls and defaults at the last moment.
Which positions will the rule apply to?
This rule will be applicable only on the day on which the contract of that stock is expiring, usually the last Thursday of the month. This change will not impact calendar spreads for the next month or beyond.
Why did SEBI take this step?
The regulator believes that the closing of one leg on the expiry day, which suddenly creates huge margin requirements on the remaining positions, can pose a risk to the system. Through this decision, SEBI wants to bring stock derivatives at par with the rules of index derivatives, where strict margin system is already in place.
According to SEBI, when a portion of the calendar spread expires on the expiry day, the remaining position remains unhedged. In such a situation, sharp fluctuations in share prices can become a threat to both traders and brokers. To reduce this risk, the regulator has decided to remove margin relief on expiry day.
It will not be easy to adopt calendar spread strategy on expiry day in stock derivatives after May 5, 2026. Traders will now have to trade with more capital, better planning and strict risk management.
Simply put, expiry day trading requires more caution than ever before.
What will change after the new rule
- Holding spread positions will become expensive on the day of expiry
- You will have to block more capital or close the position prematurely
- Simply put, now it will be difficult to make a “big trade for less money” on the expiry day.
Retail traders are most affected
Market experts believe that this change may reduce trading volume in the derivatives segment. Especially for retail traders, who depend on short-term and expiry day trading, this rule can become a challenge.
Already, decisions like increasing the contract size and limiting weekly expiry have increased the pressure on small traders. Now with the end of margin exemption on expiry day, trading will become more capital-based.
Where will there be no change
SEBI has clarified that there is no change in the margin calculation for calendar spreads on non-expiry days. Stock exchanges and clearing corporations have been directed to update their systems, bylaws and rules to implement the revised margin framework.
What will be the market trend going forward?
This change may curb short-term speculation, but in the long run it is expected to make the market more balanced and secure. This step is being considered positive for institutional investors and those doing hedging.
SEBI has a clear message – derivatives trading should now be done with more understanding, better planning and strong risk management.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice in any way. ET NOW Swadesh recommends its readers and viewers to consult their financial advisors before taking any money-related decisions.
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