Archive · 28 Jun 2025
SEBI's Index Option Cap: How it May Change Trading
SEBI is changing the rules for trading options, putting a limit on how much money traders can have in certain positions.
This means traders might start buying different types of options, specifically those that are farther away from the current price (OTM).
If you're trading, you'll need to think carefully about whether options or futures are a better deal, considering how much you could win or lose.
The new rules could open up chances to profit from the price differences of these options.
SEBI is implementing a cap on index option positions, effective July 1, 2025.
Traders cannot exceed 1,500 crore net or 10,000 crore gross exposure.
The cap is linked to the Futures Equivalent Open Interest (FEqOI) measure, taking effect on October 1, 2025.
The changes could lead to increased demand for out-of-the-money (OTM) options.
Retail traders should consider futures for potentially better gains relative to options, when considering reward-to-risk ratios.
- Who
- SEBI and traders.
- What
- SEBI is implementing position limits on index options.
- When
- The position limit on index options is effective July 1, 2025, while the measure linked to FEqOI takes effect on October 1, 2025.
- Where
- India
- Why
- To manage market risk and potentially shift trading behavior.
Potential Shift in Demand
N/A
Market Impact
Potential Shift in Demand
Increased demand for OTM strikes is possible.
N/A
N/A
- Index Option Position Cap (Net)
- 1,500 crore
- Index Option Position Cap (Gross)
- 10,000 crore
- Effective Date of Index Option Cap
- July 1, 2025
- Effective Date of FEqOI Measure
- October 1, 2025