Table of Contents

1. What is Expiry Day?
2. Why Expiry Day Matters to Traders
3. Common Expiry Day Trading Strategies
4. Tips to Trade Safely on Expiry Day
5. Expiry Day in India: Market Timings and Contracts
6. FAQs
7. External Resources

What is Expiry Day?

Expiry day is the final trading session for a futures or options (F&O) contract before it becomes void. After this day, the contract ceases to exist. In Indian markets, this typically occurs on the last Thursday of the month for monthly contracts. For index options like Nifty and Bank Nifty, expiry happens every Thursday.

Because of the closing nature of contracts, expiry day experiences significant activity, with traders adjusting or closing positions. This results in a surge of volume, volatility, and intraday opportunities.

Why Expiry Day Matters to Traders

Expiry day is not like any regular trading session. Here’s why it’s important:

• Increased Liquidity: Many institutional players square off positions, increasing participation and volume.
• Volatility Opportunities: Sharp intraday moves are common due to position unwinding and market sentiment shifts.
• Time Decay Acceleration: In options trading, theta (time decay) peaks, particularly for out-of-the-money (OTM) contracts.
• Price Manipulation Risk: Expiry can sometimes attract price manipulation attempts near strike prices, especially in illiquid stocks.

Smart traders learn to ride the volatility, while unprepared traders often suffer due to sudden movements.

Common Expiry Day Trading Strategies

1. Option Writing (Selling)

Since options lose value fastest on expiry day, many traders sell OTM options to collect premium. This is best done when markets are expected to stay in a range.

2. Straddle/Strangle Adjustments

Traders holding non-directional positions like straddles or strangles adjust their legs based on intraday moves to lock in profits or minimize losses.

3. Directional Breakout Trading

Markets usually remain range-bound in the first half of the session. After 1:00 PM, a strong directional move often emerges. Breakout strategies using technical indicators like VWAP, RSI, or Bollinger Bands work well here.

4. Iron Condors and Butterflies

Advanced options strategies like Iron Condors or Butterflies profit from tight ranges and high theta decay. These are low-risk, low-reward setups suitable for neutral market expectations.

Tips to Trade Safely on Expiry Day

• Avoid Overleveraging: Volatility can wipe out overexposed positions fast.
• Monitor Open Interest (OI): Track real-time changes in OI to spot shifts in market sentiment and support/resistance levels.
• Stick to Liquid Instruments: Trade Nifty, Bank Nifty, or large-cap stocks with deep liquidity and tight spreads.
• Use Stop Loss Always: Even the best expiry day setups can fail. Stop loss is your insurance.
• Avoid Emotional Trades: Chasing losses or reacting impulsively can be disastrous.

Expiry Day in India: Market Timings and Contracts

Here’s a snapshot of expiry-related trading in Indian markets:

📌 Note: If Thursday is a trading holiday, the expiry happens on the previous trading day.

FAQs

Q1: Which stocks are best for expiry day trading?

A: Nifty and Bank Nifty are most preferred due to high liquidity. For stock-specific trades, focus on high-volume, high-volatility names like Reliance, ICICI Bank, Infosys, and TCS.

Q2: What is the best time to trade on expiry day?

A: The most actionable trading window is between 1:00 PM and 3:30 PM. This is when directional breakouts tend to happen after morning consolidation.

Q3: Why do options lose value quickly on expiry?

A: Due to theta decay, the time value of options erodes fastest on expiry day. This leads to sharp declines in premium, especially for OTM options.

Q4: How do institutions trade on expiry day?

A: Institutions either roll over their positions to next series or square them off. They also actively participate in option writing and hedging strategies to optimize returns or manage risk.

Q5: Can beginners trade on expiry day?

A: Yes, but with caution. Beginners should use small capital, avoid complex strategies, and always trade with a stop loss. Paper trading for a few expiries can help gain confidence.

External Resources

• 🔗 NSE Derivatives Market – Official Page
• 🔗 SEBI Circulars on Derivatives Trading
• 🔗 Nifty Bank Index Futures & Options