Nse Option Market

CONTRACT SPECIFICATION FOR INDEX OPTIONS

On NSEs Index Options market, contracts at different strikes, having one month, two month and three month expiry cycles are available for trading. There are typically one month, two month and three month options, each with minimum seven different strikes available for trading. Hence at a given point in time there are minimum 3 x 7 x 2 or 42 options products. Option contracts are specified as follows:

DATE-EXPIRYMONTH-YEAR-CALL/PUT-AMERICAN/EUROPEAN-STRIKE.

For example the European style call option contract on the Nifty index with a strike price of2040 expiring on the 30th June, 2005 is specified as 30 JUNE 2005 2040 CE.

Just as in the case of futures contracts, each option product (for instance, the 28 JUN 2005 2040 CE) has it’s own order book and it’s own prices. All index options contracts are cash settled and expire on the last Thursday of the month. The clearing corporation does the movation. Just as in the case of futures, trading is in minimum market lot size of 100 units. The minimum tick for an index option contract is 0.05 paise.

DETAILED CONTRACT SPECIFICATIONS FOR INDEX OPTIONS TRADING ON THE NSE / – S&P CNX NIFTY OPTIONS:

  1. Underlying Exchange : S&P CNX NIFTY.
  2. Exchange of Trading : National Stock Exchange of India Limited.
  3. Security Descriptor : N OPTIDX NIFTY.
  4. Contract Size : Permitted lot size shall be 100 (Minimum value 2 lakh).
  5. Price Steps : Re. 0.05.
  6. Price Bands : Not Applicable.
  7. Trading Cycle : The options contracts will have a maximum of three month trading cycle – the near month (one), the next month (two), and the far month (three). New contract will be introduced on the next trading day following the expiry of near month contract.
  8. Expiry Day : The last Thursday of the expiry month or the previous trading day if last Thursday is Holiday.
  1. Settlement Basis : Cash Settlement on T+l Basis.
  2. Style of Option : European.
  3. Strike Price Interval : Rs.10.
  4. Daily Settlement Price : Premium Value (Net).
  5. Final Settlement Price : Closing value of the index on the last trading day.

II-CNX IT OPTIONS:

  1. Underlying Index : CNX IT
  2. Exchange of Trading : National Stock Exchange of India Limited.
  3. Security Descriptor : N OPTIDX CNX IT
  4. Contract Size : Permitted lot size shall be 100 (Minimum value 2 lakh).
  5. Price Steps : Re. 0.05.
  6. Price Bands : Not Applicable.
  1. Trading Cycle : The options contracts will have a maximum of three month trading cycle – the near month (one), the next month (two), and the far month (three). New contract will be introduced on the next trading day following the expiry of near month contract.
  2. Expiry Day : The last Thursday of the expiry month or the previous trading day if last Thursday is Holiday.
  3. Settlement Basis : Cash Settlement on T+l Basis.
  4. Style of Option : European.
  5. Strike Price Interval : Rs.10.
  6. Daily Settlement Price : Premium Value (Net).
  7. Final Settlement Price : Closing value of the index on the last trading day.

Ill – BANK NIFTY OPTIONS:

  1. Underlying Index : CNX BANK.
  2. Exchange of Trading : National Stock Exchange of India Limited.
  1. Security Descriptor : N OPTiDX BANK NIFTY.
  2. Contract Size : Permitted lot size shall be 100 (Minimum value 2 lakh).
  3. Price Steps : Re. 0.05.
  4. Price Bands : Not Applicable.
  5. Trading Cycle : The options contracts will have a maximum of three month trading cycle – the near month (one), the next month (two), and the far month (three). New contract will be introduced on the next trading day following the expiry of near month contract.
  6. Expiry Day : The last Thursday of the expiry month or the previous trading day if last Thursday is Holiday.
  7. Settlement Basis : Cash Settlement on T+l Basis.
  8. Style of Option : European. *
  9. Strike Price Interval : Rs. 10.
  10. Daily Settlement Price : Premium Value (Net).
  11. Final Settlement Price : Closing value of the index on the last trading day.

GENERATION OF STRIKES:

The Exchange has a policy of introducing strike prices and determining the strike price intervals. Let us look at an example of how the various option strikes are generated by the exchange.

Suppose we start with Nifty at 2000 and options with strikes 2070, 2060, 2050, 2040,2030,2020,2010, 2000, 1990,1980,1970,1960,1950,1940,1930.

The Exchange commits itself to an inter strike distance of say 10.

When the Nifty closing price crosses 2070, a new set of 7 out of Money (OTM) strikes start trading from the next day.

When the Nifty closing price falls below 1930, a new set of 7 in the Money (ITM) strikes start trading from the next day.

 

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