Expiry trading

Expiry trading refers to the concentrated buying and selling of futures and options contracts on their designated expiry date — the last trading day for a specific contract series — when the settlement of all open positions occurs and the contract ceases to exist. On expiry day in Indian F&O markets, several unique market dynamics occur simultaneously: time value of options collapses to zero (making theta decay maximum), gamma reaches its peak (small underlying moves create large delta changes), open interest in the expiring contract plummets as positions are closed, and fresh positions open in the next-month contract series. These dynamics create specific expiry-day trading patterns — including the 'max pain' phenomenon (where the market gravitates toward the strike price at which the maximum number of options expire worthless, causing maximum loss to option buyers and maximum profit to option sellers), expiry-day volatility spikes, and intraday price whipsaws driven by delta hedging by option market makers. Indian weekly options expiry schedule (Nifty 50 every Thursday, Bank Nifty every Wednesday, FinNifty every Tuesday, Sensex every Friday) means expiry trading opportunities arise multiple times per week. SEBI has implemented several measures to address risks from expiry-day concentrated activity — including higher margin requirements on expiry day, restrictions on near-zero premium OTM options, and increased minimum contract sizes — aimed at reducing the speculative excess and retail losses associated with expiry day derivatives trading.