SEBI's October 2024 Index Derivatives Rules, Explained

An option trade can cost a few thousand rupees to enter. That can make it look like a small commitment. But the buyer can lose the entire amount, and the trade has a deadline: the market must move far enough in their favour before the option expires.

By 2024, India’s futures and options (F&O) market had drawn in millions of individual traders. SEBI’s September study found that about nine out of ten individuals in its sample lost money in the financial year ending March 2024, after trading costs.

The Securities and Exchange Board of India (SEBI), the regulatorSecurities market regulatorThe public body that registers and supervises brokers and other market participants. In India this is the Securities and Exchange Board of India (SEBI).View topic and related stories overseeing India’s securities markets, was also examining heavy trading in short-lived index options. On 1 October 2024, it announced six measures.

Why did SEBI change the size of a trade, the days on which contracts expired, and when traders had to put up money? A simple option trade helps connect those changes.

What a ₹3,000 option trade actually buys

The Nifty 50 is a stock-market indexStock market indexAn index is a single number that tracks the prices of a chosen group of shares. It is used to describe how a market, or part of it, has moved.View topic and related stories: a number that tracks a basket of shares. An index optionIndex options and premiumAn index option is a contract whose value depends on a share index. The buyer pays a price, the premium, upfront; the contract's value can change quickly because it has a fixed life.View topic and related stories lets someone take a position on its movement without buying those shares. It is a derivativeDerivativeA derivative is a contract whose value depends on something else, such as an index, a share or a commodity price. Futures and options are common examples, and they are traded in fixed lots.View topic and related stories because its value depends on something else, here the index.

The buyer pays for that opportunity. This price is called the premium. A call optionCall and put optionsA call option gives the buyer the right, not the obligation, to buy at a fixed price by a set date; a put gives the right to sell. The buyer pays a premium, and the most the buyer can lose is that premium, while a seller can lose much more.View topic and related stories can benefit from a rise in the index; a put option can benefit from a fall. Both expire on a set date.

Consider a hypothetical option priced at ₹40 per unit. Suppose it must be bought in a group of 75 units, called a lot. The buyer pays ₹40 × 75 = ₹3,000, before charges.

If its price later rises to ₹60 per unit, the buyer could sell the lot for ₹4,500, a ₹1,500 gain before charges. If it expires worthless, the whole ₹3,000 is lost. These are illustrations, not a prediction of how an option will move.

At a hypothetical Nifty level of 25,000, those 75 units represent ₹18.75 lakh of index value. That is the contract sizeDerivative contract size and lot sizeDerivatives trade in fixed lots. For an index contract, lot size times the index level gives the contract's notional value, so changing either changes how much exposure one contract carries. The notional value is not the amount paid up front.View topic and related stories, also called its notional value. It is not the buyer’s bill, and it does not mean the buyer of this option can lose ₹18.75 lakh.

The small payment gives exposure to a much larger contract. This is leverageLeverageLeverage is using borrowed money to hold more assets than your own capital could buy. It magnifies gains and losses, so a small fall in asset prices can wipe out a large share of capital.View topic and related stories. It helps explain why the premium can gain or lose a large percentage of its value. The option does not move at a fixed rate with the index, however. How far the index moves, the time remaining, and the price paid all matter.

The seller has a different obligation. In exchange for receiving the premium, the seller must pay what is due if the option finishes against them. To support that obligation, the seller must provide marginMarginThe part of a purchase's value that a borrower must put in with their own money. A loan without margin lets the borrower take larger positions with less of their own cash.View topic and related stories: money or eligible collateral held as a cushion against losses. The buyer’s premium is a purchase price; the seller’s margin is a safeguard against an obligation.

Why the deadline made a cheap option risky

Unlike a share, an option cannot simply be held indefinitely while the buyer waits for a recovery. Its expiry dayExpiry day in options tradingAn option has a last day, its expiry. Contracts close to expiry can change in price within minutes, which is why exchanges and regulators watch expiry-day trading closely.View topic and related stories is the deadline for the contract to settle.

Return to the ₹3,000 example. Buying a call because the index might rise is not enough. The move must also be large enough, and happen soon enough, to make the option worth more than the buyer paid. A correct guess about direction can still lose money.

Near expiry, there is little time left for a favourable move. A low premium can look attractive, but the option may lose all its remaining value. SEBI described expiry-day positions held for minutes and heightened speculation.

Weekly contracts on different indices had expiry dates spread through the week. This made short-lived trades available repeatedly. SEBI’s concern was how that activity affected investors and market stability.

The wider market had grown rapidly. SEBI counted about 96 lakh individual traders in NSE’s equity F&O segment in the financial year ending March 2024, nearly twice the number two years earlier.

But participation was not the same as success. In the study’s sample of the top 15 brokers, covering about 90 percent of individual traders, loss-makers lost an average of ₹1.20 lakh that year. Trading costsTransaction costsBuying and selling usually involve brokerage, spreads, taxes and other charges. Small costs repeated over many trades reduce the return an investor actually keeps.View topic and related stories were included: repeated trades can add costs even when an individual trade looks small.

The study and the rule changes were part of the same wider debate about retail trading. The rule-making process had already begun before the loss study appeared; the circular does not cite that study as its basis.

First, SEBI changed the size and availability of trades

SEBI raised the minimum value of new index derivative contracts to ₹15 lakh, with lot sizes set to put their value between ₹15 lakh and ₹20 lakh at review. The older band dated from 2015; SEBI said market values and prices had since risen about threefold.

NSE then increased the Nifty lot from 25 units to 75 for new contracts from November 2024. At the same illustrative premium of ₹40, buying one lot would now cost ₹3,000 instead of ₹1,000. The premium per unit has not changed; the smallest permitted quantity has tripled.

That is the practical link between contract size and the money a buyer needs. It still does not mean paying the full ₹18.75 lakh represented by our example. Existing contracts retained their old lot sizes until expiry.

SEBI also limited each exchange to weekly contracts on one benchmark index. NSE retained Nifty 50 weekly options and ended weekly contracts on its other three indices. Weekly options continued, but there were fewer indices offering them.

Then it tightened checks on the money behind a trade

The other four measures addressed funding and risks that could build up within the trading day.

Buyers had to fund the premium upfront. Brokers had to collect the net option premium payable by a client before the trade. In the simple ₹3,000 purchase, that means having the ₹3,000 available upfront. It closes the gap between taking a position and providing the money to pay for it.

Sellers needed a larger expiry-day cushion. SEBI added a 2 percent extreme loss margin for short options expiring that day. This was extra protection against an adverse move, separate from the buyer’s premium.

A margin discount stopped applying to the expiring part of a spread. Suppose a trader holds opposite positions on the same index with different expiry dates. This is a calendar spreadCalendar spreadsA calendar spread combines opposite positions in related contracts with different expiries. Their gains and losses may partly offset, but an expiring contract can behave differently from a later one.View topic and related stories. Because a loss on one may be partly offset by a gain on the other, the pair normally requires less marginMargin requirementMargin is money a broker must deposit as a cushion against losses on trades. Regulators and exchanges can raise it when prices swing sharply.View topic and related stories. But a contract expiring today can behave very differently from one expiring later. The expiry-day margin benefit was removed for the expiring contract.

Position limits were checked during trading hours. Position limitsTrading position limitsPosition limits restrict the size of trading exposures. Checks during the trading day can detect positions that would be missed by an end-of-day check.View topic and related stories restrict how large a trading position may become. An end-of-day check can miss a position that exceeds the limit during the day and is reduced before closing. The circular required at least four randomly timed checks during the day.

These safeguards also matter beyond one trader. Clearing corporations arrange settlement so that money owed on trades is paid. Margin helps manage counterparty riskCounterparty riskCounterparty risk is the chance that the other side of a deal fails to pay what it owes. It matters most when many institutions owe each other at once.View topic and related stories: the risk that someone cannot meet their obligations. It does not protect an option buyer from losing the premium.

Sidebar: the changes arrived in stages. The contract-size and weekly-expiry changes began in November 2024. NSE Clearing set upfront premium collection and the calendar-spread change for 10 February 2025, later than the circular’s original date. Intraday monitoring was scheduled from April 2025, though SEBI’s later review noted an exemption from penalties for intraday index-derivative limit breaches until further directions. This describes the rollout of these measures, rather than every rule in force today.

Did tighter rules mean traders stopped losing money?

Fewer trades and better outcomes are different things. A market can become less active while the people still trading continue to lose money.

SEBI’s July 2025 review found that the number of individual derivatives traders fell 20 percent when it compared December 2024 to May 2025 with the same months a year earlier. That showed lower participation, but did not establish what caused it.

Its later review found that about 88 percent of individuals still lost money in the financial year ending March 2026. The sample covered 15 brokers and about 90 percent of individual traders. Combined net losses were ₹91,685 crore, lower than the revised previous-year total of about ₹1.12 lakh crore.

That was a reduction in total losses, not evidence that option trading had become safe. Participation had also fallen, and SEBI cautioned against attributing the change to the rules alone. Participation was already slowing before the measures, and a higher securities transaction tax (STT)Taxes on investment returnsInterest, dividends and capital gains can be taxed differently, so returns before tax are higher than what an investor keeps. The rules depend on the asset, the holding period and the investor.View topic and related stories on futures and options trades took effect around the same time.

What an Indian reader can learn from this

The first useful distinction is between what a trade costs to enter and what can happen to that money. A ₹3,000 premium is a small fraction of the contract’s notional value. Yet all ₹3,000 can disappear. A low entry price does not make an option a small-risk version of owning shares.

The second is between a buyer’s loss and the market’s ability to settle trades. Upfront collection and margin rules help ensure obligations are funded. They do not ensure the buyer has made a profitable decision.

Derivatives also have a use beyond taking a view on market direction. They can provide a hedgeHedgingHedging means taking a second position that tends to gain when the first one loses. It reduces one risk, usually at a cost, and can leave other risks unchanged.View topic and related stories: a position intended to offset losses elsewhere. Understanding that purpose is different from assuming every derivative trade reduces risk. An option bought on its own can still lose its full premium.

SEBI’s response changed the size and availability of contracts and tightened the money checks behind them. To understand why those changes mattered, start with the trade itself: the premium paid, the quantity bought, the expiry deadline and the obligation taken on.

What to remember

• An option’s premium, contract value and margin are different amounts serving different purposes.
• Getting the direction right is not enough; the size and timing of the move also matter.
• A larger lot raises the money needed for one trade at the same premium per unit.
• Stronger market safeguards do not guarantee that individual traders make money.

Sources

Show 9 sources

1. Securities and Exchange Board of India, “Measures to Strengthen Equity Index Derivatives Framework for Increased Investor Protection and Market Stability”, circular SEBI/HO/MRD/TPD-1/P/CIR/2024/132, 1 October 2024Accessed 19 Oct 2026 · Supports: the six measures, rationale, process, and effective dates in the circular.
2. Securities and Exchange Board of India, Department of Economic and Policy Analysis, “Analysis of Profits & Losses in the Equity Derivatives Segment (FY22-FY24)”, published 23 September 2024Accessed 11 Oct 2026 · Supports: trader numbers, loss shares, loss amounts, sample scope, demographics.
3. Securities and Exchange Board of India, “Comparative study of growth in Equity Derivatives Segment vis-à-vis Cash Market after recent measures”, July 2025Accessed 19 Oct 2026 · Supports: turnover growth, December 2024 to May 2025 changes, FY25 loss figures, causality caution, penalty exemption of 28 March 2025.
4. Securities and Exchange Board of India, Department of Economic and Policy Analysis, “Profitability of Individual Traders in the Equity Derivatives Segment (FY25-FY26)”, August 2026Accessed 19 Oct 2026 · Supports: FY26 trader counts and losses, revised FY25 loss, expiry-day share, STT change, causation caution.
5. National Stock Exchange of India, circular NSE/FAOP/64506 (Ref. 123/2024), “Discontinuation of weekly Derivatives contracts on BANKNIFTY, MIDCPNIFTY and FINNIFTY index”, 10 October 2024Accessed 11 Oct 2026 · Supports: NSE retained weekly options on Nifty 50 only; last dates of the other three.
6. National Stock Exchange of India, circular NSE/FAOP/64625 (Ref. 128/2024), “Contract size revision for index derivatives”, 18 October 2024Accessed 19 Oct 2026 · Supports: revised lot sizes and transition dates.
7. NSE Clearing Limited, circular NCL/CMPT/66046 (Ref. 004/2025), “Upfront collection of Option Premium”, 9 January 2025Accessed 11 Oct 2026 · Supports: upfront premium provision effective 10 February 2025.
8. NSE Clearing Limited, circular NCL/CMPT/66047 (Ref. 005/2025), “Removal of calendar spread treatment on the Expiry Day”, 9 January 2025Accessed 11 Oct 2026 · Supports: calendar-spread removal effective 10 February 2025.
9. Securities and Exchange Board of India, Investor Website, “Understanding Derivatives”Accessed 19 Oct 2026 · Supports: definitions of derivative, call option, put option and premium.