F&O Trading Basics in India: Lot Sizes, Margins, Settlement

Practical guide to Futures & Options trading on NSE — contract sizes, margin requirements, expiry calendar, settlement mechanics, and the new SEBI rules in effect from late 2024.

5 November 2024 · 9 min read

Futures & Options (F&O) in India is one of the largest derivatives markets in the world by contract count. SEBI's 2024 study showed that more than 95 lakh unique individuals traded equity F&O in FY24. Most lost money — but that doesn't mean F&O is bad; it means most retail participants approach it as gambling rather than as a hedging or income tool.

This article covers the mechanics: contracts, margins, settlement, expiries. If you're new to options themselves, start with Call Options Explained and Put Options Explained.

What's tradable in F&O

NSE's F&O segment currently has:

Index futures and options: NIFTY 50, BANKNIFTY, FINNIFTY, MIDCPNIFTY, NIFTYNXT50, plus a few sectoral indices.
Stock futures and options: ~200 individual stocks (the F&O universe). SEBI reviews this list periodically.
BSE: SENSEX, BANKEX index derivatives — growing fast since 2024.

Lot sizes (post-November 2024 revision)

SEBI mandated lot-size hikes in late 2024 to reduce retail F&O participation. The current sizes:

| Contract | Lot size | Approx notional @ Nov 2024 | |---|---|---| | NIFTY | 75 | ~₹17 lakh | | BANKNIFTY | 30 | ~₹15 lakh | | FINNIFTY | 65 | ~₹15 lakh | | MIDCPNIFTY | 140 | ~₹17 lakh |

Stock lot sizes vary — RELIANCE is 250, SBIN is 1,500, COALINDIA is 1,500, etc. Brokers publish the current contract specification on their order entry screens.

Expiry calendar (post-November 2024)

SEBI also rationalized weekly expiries. Each exchange now has only one weekly index option contract:

NSE: NIFTY — Thursday weekly. BANKNIFTY, FINNIFTY, MIDCPNIFTY — monthly only.
BSE: SENSEX — Friday weekly. BANKEX — monthly only.

Monthly expiries remain on the last Thursday of each calendar month for NSE contracts (subject to NSE notification for holiday adjustments).

Margins

NSE uses SPAN + Exposure margin for derivatives. Two parts:

SPAN margin — covers a one-day adverse move based on volatility scenarios. Typically 8–15% of notional for index derivatives.
Exposure margin — additional buffer. Typically 2–5% of notional.

For options buyers, the margin requirement equals the option premium (no SPAN needed — your max loss is the premium).

For options sellers, full SPAN + Exposure is required. As of late 2024, a NIFTY short straddle requires roughly ₹1.5–2 lakh in margin per lot, which can spike to ₹3 lakh+ during high VIX periods.

SEBI rules require margin to be collected upfront and reported by brokers — the days of leverage-amplified F&O are over.

Settlement

Index options: Cash-settled. Profit/loss credited/debited in INR.
Stock options: Cash-settled since October 2023 (previously physical delivery). This was a major change — it removed the auto-square-off requirement and physical delivery margin spikes.
Index futures: Cash-settled.
Stock futures: Physical settlement. You must deliver/receive shares if you hold through expiry.

Settlement happens T+1 for derivatives. M2M (mark-to-market) for futures is daily.

STT, transaction charges, and stamp duty

| Charge | Rate (as of late 2024) | Who pays | |---|---|---| | STT on options sell (premium-based) | 0.10% | Seller | | STT on options exercise (intrinsic-based) | 0.125% | Buyer | | STT on futures sell | 0.02% | Seller | | Exchange transaction charges (options) | 0.0345% | Both | | SEBI charges | ₹10/Cr turnover | Both | | Stamp duty (options buy) | 0.003% | Buyer | | GST | 18% on brokerage + exchange charges | Both |

These add up. A typical round-trip on a NIFTY options trade can cost 0.4–0.8% of notional in friction — meaningful when targeting 1–2% gains per trade.

Risk-management features

NSE provides several tools retail traders should know:

MWPL (Market-Wide Position Limit) — stocks near 95% MWPL utilization go into "ban period" and only square-off orders are allowed.
Price band protection — orders outside the band get rejected.
Margin alerts — brokers send near-margin-call notifications.

The hard truth from SEBI's 2024 study

| Stat | Number | |---|---| | Unique F&O traders in FY24 | 95.7 lakh | | Net loss-making traders | ~93% | | Aggregate net losses | ₹51,689 crore | | Avg loss per loss-making trader | ₹1.20 lakh |

Most retail F&O participants would have done better putting their capital into a Nifty index fund or fixed deposit. F&O has uses — hedging, defined-risk speculation, income from systematic selling — but those require discipline, edge, and capital that most retail accounts don't have.