Despite hike in lot sizes, rollover to November series witnesses spurt

The increase in lot sizes seems to have had little impact as rollover of equity derivative contracts to the November series on the NSE was higher than the preceding three-month average, along with a rise in open interest, say market experts.

From November, the lot sizes of many contracts, including Nifty and Bank Nifty have been increased sharply. For Nifty, the lot size has been increased to 75 (from 50 earlier) and for Bank Nifty to 30 (25).

A report by Angel Broking, said, “Nifty rollover around 7 per cent is higher than the average and we have seen rise in open interest too. If we look at FIIs’ data, we can find that they have been unwinding their positions in the last three to four trading sessions in index futures and their rollover in this segment too is less that the market rollover. Bank Nifty too had high rollovers around 73 per cent, which is higher than its average. And interestingly, we have witnessed significant formation of short positions.”

“Call options with strike prices at 8,000-8,500 levels were in action, indicating a resistance level of 8,380-8,400,” the report added.

For put options, strike prices at 8,000-8,100 levels saw meaningful build-up, with moderate implied volatility at around 17 per cent. The brokerage did not expect a huge change unless 8,000 or 8,400 levels were breached.

According to ICICI Securities, rollover in Bank Nifty was in line with expectations with broader distribution of open interest in the index. Open interest is the number of outstanding contracts in futures and options.

From November, the minimum contract size of equity derivatives has been increased to ₹5 lakh from ₹2 lakh. Traders are expecting a shift towards options trading as margin requirements for futures would be higher than that of options.

Nikhil Kamath, Director — Trading & Risk, Zerodha, said, “Revised lot sizes and increased margin requirements which take effect forthwith could cause significant changes in trading behaviour.”

“Smaller retail traders who would trade one lot of futures at a time could now be forced to trade options instead of futures, essentially due to lower margin requirements in options. This, in turn, could take away from SEBI’s rationale of moving the minimum contract size to upwards of ₹5 lakh on derivative contracts.”  

According to SEBI norm, the lot size for an underlying would be the same across exchanges and would be reviewed every six months.