Sebi Proposes Intraday Option Strike Additions to Help Traders Navigate Volatility

Why It Matters

Standardising strike management will improve liquidity and reduce trading gaps during periods of heightened volatility, benefitting both traders and brokerage infrastructure. The changes could make Indian derivatives markets more resilient and attractive to domestic and foreign participants.

Key Takeaways

• SEBI mandates minimum in‑the‑money and out‑of‑the‑money contracts daily
• Exchanges may add new strike prices intraday without broker system changes
• Periodic removal of distant strikes keeps contracts relevant to market price
• Public feedback open until 15 June, shaping India’s derivatives framework

Pulse Analysis

India’s derivatives markets have long grappled with abrupt price swings that leave traders stranded without nearby option contracts. When volatility pushes the underlying asset beyond the farthest listed strike, market participants face execution delays and widened spreads. SEBI’s latest proposal directly addresses this friction by mandating a baseline of in‑the‑money and out‑of‑the‑money options, ensuring that a usable range of strikes is always available. By codifying daily reviews, the regulator aims to keep the strike ladder aligned with real‑time price movements, a step that mirrors best practices in more mature markets such as the United States and Europe.

The framework also introduces the ability for exchanges to insert new strike prices intraday, a move that sidesteps the traditional requirement for broker‑platform updates. This flexibility is expected to streamline order flow, reduce latency, and lower operational costs for brokerage firms that would otherwise need to refresh their contract databases multiple times a day. Moreover, the provision to retire strikes that drift far from current market levels helps maintain a clean, efficient order book, potentially tightening bid‑ask spreads and enhancing overall market depth. Exchanges retain discretion over strike intervals and the number of contracts, but must publish their rules publicly, fostering greater transparency.

If adopted, these measures could boost confidence among institutional investors and foreign participants who have previously cited limited strike availability as a barrier to entering India’s options market. The open comment period until mid‑June invites industry stakeholders to shape the final rules, ensuring that practical concerns from brokers, market makers, and large traders are addressed. Successful implementation may position India’s derivatives ecosystem as a more robust, liquid venue, supporting the broader goal of deepening capital markets and attracting diversified capital flows.