Published : 31 August 2023
By : Sachin Gupta
To eliminate ambiguity or confusion among dealers, the Indian stock exchange maintains a fixed standard expiry date for the F & O market. Every month's final Thursday is the Expiry date in derivatives trading.
Since F&O contracts close on the expiry date, the stock exchange as a whole experiences significant volatility. The stock market may move in either a positive or negative direction depending on the type of derivatives contracts that are paid on the expiry date.
Arbitrage trading is another element that influences stock market prices close to the expiration date. Before the contracts' expiration date, F&O traders that engage in arbitrage trading assess the performance of the contracts' underlying assets. To increase profits, many futures and options traders place trades on secondary markets.
Avoid trading more than 2% of your capital on the expiry day to manage your money successfully. The tactic caps your potential loss at what you paid for the option's premium. If you continue to retain the option contract and it expires worthless, you forfeit the whole premium as well as any applicable taxes and trading fees. So, before the expiration date, you must settle your position in the options.