Sebi sets new intraday limits for index options to curb risky bets

In a move to rein in risky bets, the Securities and Exchange Board of India (Sebi) has introduced an entity-level framework to monitor intraday positions in equity index options.

Effective 1 October 2025, net intraday positions will be capped at ₹5,000 crore and gross positions at ₹10,000 crore per side. 

Under the revised framework, each entity will have an intraday net position limit of ₹5,000 crore, up from the current end-of-day cap of ₹1,500 crore. Also, there will be an intraday gross position limit of ₹10,000 crore separately on both sell and buy sides, consistent with the existing end-of-day limits.

Net position refers to the overall directional bet (long or short) after cancelling out opposite positions, while gross position represents the total exposure on both buying and selling sides combined.

Sebi’s new limits aim to curb outsized expiry-day bets without disrupting market-making activity.

The circular released late Monday, said exchanges will enforce compliance through at least four random snapshots during the trading day, including one between 2.45 pm and 3.:30 pm. Breaches on expiry days will attract penalties or additional surveillance deposits from 6 December 2025.

The decision to set a ₹5,000 crore intraday net cap follows market feedback and SMAC deliberations, after earlier proposals and a May 29 circular that set end-of-day limits at ₹1,500 crore net and ₹10,000 crore gross with a glide path to December 6, 2025. There was no separate intraday cap.

The decision to impose the ₹5,000 crore intraday limit has been cheered by market participants who had feared the markets regulator might impose the much stricter ₹1,500 crore limit during trading hours.

Angel One, the country's third-largest broker by client base, after unlisted broking firms, Zerodha and Groww, traded nearly 2% higher at ₹2,309 on the National Stock Exchange (NSE) on Tuesday. 

Sebi clarified that limits can be higher for those with underlying exposure above ₹5,000 crore. The gross limit continues to remain ₹10,000 crore.

Exchanges will also prepare a joint SOP for intraday monitoring within 15 days and issue it before the circular takes effect.

Why it matters

The Sebi clarification comes as the NSE shifted its weekly index options expiry from Thursday to Tuesday, starting today. The BSE will also shift its weekly index options to Thursday from Tuesday starting this week.

The timing is significant as these expiry day changes create new market dynamics that could affect trading patterns and volatility distribution throughout the week.

Sebi’s circular seeks to address concerns about risky trading behaviour in the derivatives market, particularly on days when options contracts expire.

Index options—used by foreign portfolio investors, domestic institutions, proprietary traders, HNIs and retail participants—allow bets on indices like Nifty and Bank Nifty without owning the underlying stocks.

The regulator's move follows instances of massive expiry-day positions that created abrupt price swings, posing risks to market stability and retail investors.

Market participants noted that the new intraday position-limit framework used delta-based monitoring with delta measuring how much an option's price changes with a change in the underlying index. "The move misses risks like gamma (how fast delta changes) and vega (sensitivity to volatility). These can cause large swings in positions during volatile markets", Akhil Puri, Partner, Financial Advisory, Forvis Mazars in India said. He believes the phased rollout with random intraday snapshots and no immediate penalties seems a balanced step toward better risk management and investor protection.

The new framework now sets clear boundaries for how much exposure individual traders or entities can take during trading hours.

Ajay Garg, CEO, SMC Global Securities said Sebi's move comes amid the oversized intraday positions on expiry days and the recent Jane Street fiasco, which highlighted risks from aggressive trading strategies. 

"These higher thresholds can provide better flexibility for traders during the day while ensuring tighter real-time surveillance," Garg said. 

He added that the random snapshots of positions, including the one between 2:45 pm and 3:30 pm, are because it is a period of heightened activity and volatility. "Sebi's move targets the growing concern of participants building disproportionately large positions, particularly on options expiry days. It seeks to curb excessive speculation, enhance real-time risk management, and reinforce market stability, thereby creating a secure trading environment for retail participants".

The case that Garg referenced involved the US trading firm Jane Street being temporarily banned by Sebi in July 2025 for alleged market manipulation in Bank Nifty index options, with the regulator claiming the firm earned unlawful gains of approximately ₹4843.57 crores over 18 expiry days between January 2023 and March 2025. The firm deposited the full amount in an escrow account and was subsequently allowed to resume trading