Sebi proposes mechanism to streamline option strike price management
May 25, 2026
Sebi has proposed a structured framework for introducing and reviewing option strike prices to improve trading continuity during sharp market movements
The Securities and Exchange Board of India (Sebi) on Monday proposed a framework governing the introduction and ongoing management of strike prices for options contracts, the most volume-generating segment of the equities market.
The proposed measures include rules for introducing option contracts to ensure the availability of a minimum number of in-the-money and out-of-the-money contracts, daily reviews of strike availability around prevailing market prices to maintain trading continuity, and periodic elimination of strike prices that are significantly away from prevailing market levels.
The proposal comes amid concerns that sharp intraday swings in underlying assets can push prices beyond the farthest available strike price, leaving traders without suitable options contracts to hedge or take positions.
In a consultation paper floated on Monday, the market regulator noted that in cases of significant price movement beyond the farthest available strike, market participants may face inconvenience due to the absence of appropriate options contracts. The proposed framework seeks to address this gap through a more structured and responsive mechanism.
At present, there is only one regulatory framework dealing with rationalisation of strike intervals for long-dated index options, while stock exchanges separately follow their own mechanisms for managing strike intervals for options on underlyings and futures contracts.
A strike price refers to the predetermined price at which an options trader has the right, but not the obligation, to buy or sell the underlying security. Strike interval refers to the gap between two strike prices and is designed to balance product availability with market liquidity.
Sebi noted that strike intervals have a direct bearing on trading activity and the availability of products for market participants. Frequent additions or revisions to contracts also require corresponding daily updates on brokers’ trading platforms and applications, increasing system-related overheads.
“The framework shall have a provision to introduce new strike prices (i.e. options contracts) intraday during market hours, in the direction of price movement in the underlying,” Sebi said, adding that such intraday additions should not require changes in the systems of stock brokers or market participants during live market operations.
Industry players say the current strike prices account for sufficiently large swings in the market. However, a framework around this is a welcome move.
For instance, the NSE’s Nifty 50 index options chain for the May 26 expiry carries 144 strike prices, ranging from 20,100 to 27,250, against the Nifty’s latest close of 24,032. This translates into available strikes roughly 16.4 per cent below and 13.4 per cent above the current index level.
However, trading activity remains heavily concentrated around at-the-money and near out-of-the-money (OTM) contracts. Data from the option chain show the highest put open interest clustered around the 24,000 strike, followed by the 23,500 and 23,000 strikes, while on the call side activity is concentrated around the 24,500 and 25,000 strikes and nearby levels. This reflects the preference among retail traders and short-term participants for relatively inexpensive OTM contracts, which dominate volumes in the index options market.
The proposed framework will apply across all options segments, including equity, currency and commodities. Sebi said rules and formulae may differ across sub-segments depending on liquidity and participation levels.
The framework will also be reviewed periodically in consultation with market participants. Sebi has sought public comments on the proposals till June 15.
[The Business Standard]
