Quasim

Pre-Expiry week's Volatiliy in Indian Market

Formazione
NSE:NIFTY1!   S&P CNX NIFTY INDEX FUTURES
Due to the physical settlement of stock derivatives(Futures and options) upon expiry, the margin required to trade/carry over such derivatives starts increasing gradually from Friday of the week preceding the expiry week. Forcing traders to close their positions in the pre-expiry week causes the pre-expiry week's volatility. In most cases, it results in a correction of the larger trend in the market. After SEBI has changed the margin rules for intra-day trading, many traders have moved to options thereby raising options share of net trading volume in monetary terms to almost 80%, thereby making the impact of pre expiry week very signifacant.

Like most things in market analysis, it isn't a rule but a general guideline that helps you better manage your risk better.

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