F&O Lot Size Changes in India: What Traders Need to Know (Effective Jan 2026)

Starting January 2026 derivative series, the National Stock Exchange (NSE) is deciding to introduce new lot sizes for some of the most traded index options following the December 2025 expiration.

This will impact the capital represented by each contract, calculations of margins, and position sizing by traders.

What Exactly Is Being Revised?

The NSE has taken the decision to rebaseline the lot size for index derivatives to align well with the current index values. The change is aimed at making it easy for traders to enter the market, as the level of the indices has resulted in big values for the contracts.

Revised FnO Lot Size

The revised lot sizes will apply to all contracts starting January 2026 - including weekly, monthly, and longer-tenure derivatives. Weekly contracts will reflect the change from the first January 2026 expiry, while monthly contracts will transition from the January month-end expiry.

Why This Change Is Important for Traders

1. Reduced Trade Value per Contract

This implies that a smaller size of a futures or options contract will be a smaller value. This will make it easier for traders with lesser funds to get into index derivatives.

2. Potential Margin Relief

Given that contract values will decline, there may also be a decrease in margin requirements. Yet, the margin will still be dependent on exchange risk factors.

3. Rethinking Position Size

Traders who use the concept of a certain "lot size" for the purpose of executing "hedge, spread, or straddle" transactions will be forced to reconsider the calculation process because the "same number of lots will represent a different notional exposure."

Effect on Different Types of Trading Styles

• New and Retail Traders:
  Smaller lot sizes may make entry into index F&O trading easier with controlled risk and improved capital efficiency.
• Experienced and Professional Traders:
  The risk metrics, hedge ratios, and exposure limits for the portfolio might require a calibration to the changed specs of the contracts.
• Algo and Systematic Traders:
  Automaton strategies, back-testing algorithms, and execution logic need to be modified based on the changed unit parameters.

Final Thoughts

The NSE’s announcement to reduce the index F&O lot sizes as from January 2026 is an appropriate move to make the markets more accessible and align the contract sizes with the current index levels. The move helps to reduce risk per trade but also allows the traders to evaluate their strategy, tools, and risk measures well in advance.

NSE circular : https://nsearchives.nseindia.com/content/circulars/FAOP70616.pdf