Why Options Trading Volume Fell Over 50% in FY26 After SEBI’s New Rules
Options trading became very popular in India in the last few years. Many people started trading options because they could take a trade with a smaller amount of money compared with some other types of trading.
Weekly expiry also became very popular. Expiry is simply the date when an option ends. Many traders used to trade heavily on these days because option prices can move very fast.
But things changed in FY26. The number of options contracts traded during the year fell by more than 50%. In simple words, if around 100 options contracts were being traded earlier, that number came down to around half.
This was a very big fall, but there was no single reason behind it. SEBI brought several new rules for futures and options. Some rules made one lot bigger, while some reduced the number of weekly expiries.
Traders also had to keep the required money ready before buying options. Trading became more expensive because some taxes went up. All these changes together helped bring down the number of options contracts being traded.
First, What Does Trading Volume Mean?
Before going further, let's understand the word volume. Here, volume simply means how many options contracts are being traded.
For example, suppose 100 contracts were traded yesterday, but today only 50 contracts are traded. The volume has fallen by 50%.
But there is one thing to remember. If the number of contracts falls by 50%, it does not always mean that the amount of money involved in trading has also fallen by 50%. We will understand this with a simple example later.
1. The Size of One Lot Became Bigger
Options are traded in lots. A lot simply tells you how many units you have to trade together.
For example, suppose one lot has 75 units. If you buy one lot, you are buying all 75 units together.
SEBI increased the size of some index futures and options contracts. Futures are another type of market contract, but here we will focus mainly on options. An index is a group of selected stocks used to show how a part of the stock market is performing. Nifty 50 and Sensex are common examples of stock market indices in India.
When the new lot sizes were decided, the total value covered by one contract had to be around ₹15 lakh to ₹20 lakh.
This does not mean that an option buyer needs ₹15 lakh or ₹20 lakh in the account to buy one option. It means that the full contract represents an index value of around ₹15 lakh to ₹20 lakh. In simple words, this is the total value covered by the contract, not the amount the option buyer has to pay.
Here is a simple example. Suppose an index is at 20,000 and one lot contains 75 units. The value covered by that contract would be:
20,000 × 75 = ₹15,00,000
But an option buyer does not normally pay this full ₹15 lakh. The buyer pays the option premium, which is the price of the option.
Why does a bigger lot size reduce the number of contracts? Suppose a trader earlier needed two smaller contracts for a particular trade. After the lot size becomes bigger, one contract may be enough for a similar trade.
The trader is still trading, but earlier two contracts were counted and now only one is counted. If this happens with many traders, the total number of contracts can come down.
2. Traders Got Fewer Weekly Expiry Choices
Weekly expiry was a big part of options trading in India. Before the new rules, traders had more weekly index options to choose from.
SEBI reduced these choices. A stock exchange is the market where shares and other market products are traded, such as NSE or BSE. Under the new rules, each exchange could keep weekly options on only one main index.
In simple words, traders no longer had as many weekly index expiries to choose from as before.
Why did this matter? A lot of trading used to happen on expiry days. Option prices can move very quickly when expiry is close, so many traders used to buy and sell options several times on these days.
When the number of weekly expiries was reduced, traders had fewer such chances during the month. So the number of contracts being traded also came down.
3. Option Buyers Had to Keep the Required Money Ready
Another rule was about option premium. Option premium simply means the price you pay to buy an option.
Suppose you want to buy an option and the total price you need to pay is ₹5,000. You need to have that ₹5,000 available when you take the trade.
Under the new rule, brokers have to collect the required option premium from the buyer before the trade. For someone taking one trade, this may not look like a big change, but it can matter to someone who keeps taking many trades during the day.
The trader needs to have enough money available for those trades. If the required money is not available, the trader cannot keep taking more trades. This can reduce very frequent trading.
4. Trading Became More Expensive
Every trade has some cost. You may pay brokerage, taxes and other charges.
One of these taxes is called STT, or Securities Transaction Tax. You don't need to remember the full name. Just understand that STT is a tax charged on some stock market trades.
The STT on options trading was increased. A small increase may not look like much if you take only one or two trades, but suppose someone takes 20 or 30 trades in a day.
The cost is paid again and again. Those small amounts can become a much bigger amount by the end of the day.
Because of this, taking many trades becomes more expensive. Some traders may then decide to take fewer trades, and that can also bring trading volume down.
5. Some Expiry-Day Trades Became Harder
Expiry days are popular because option prices can move very fast. For example, an option may be trading at ₹50 and then move sharply within a short time.
This attracts traders who are looking for a quick profit, but the same fast move can also create a quick loss.
SEBI also changed the rules for some trades taken around expiry. Earlier, traders taking certain positions together could get a reduction in the amount of money they needed to keep with the broker.
Under the new rules, this reduction became more limited for some expiry-day trades. As a result, traders could need to keep more money available to take the same type of trade.
For a trader taking many expiry-day trades, this can make a big difference. If more money is needed for each trade, it becomes harder to keep taking trades again and again.
This made very frequent expiry-day trading harder for some traders.
Why Did SEBI Bring These Rules?
SEBI had a major concern. A large number of normal individual traders were losing money in futures and options.
SEBI studied the trading results of these traders and found that most of them were losing money. This was especially worrying because options can look very easy to trade.
Sometimes an option may cost only a small amount compared with buying shares. A beginner may see this and think:
“I don't need much money, so the risk must also be small.”
But that is not true. An option can lose value very quickly.
This becomes even more risky when someone keeps taking short-term trades without properly understanding how options work. The new rules were brought to control some of this risky trading.
Does a 50% Fall Mean the Options Market Became Half as Big?
No. This part is easy to misunderstand.
The fall mainly tells us that the number of options contracts traded came down sharply. Here is an easy example.
Suppose earlier 100 small boxes were sold for ₹100 each. That means:
100 × ₹100 = ₹10,000
Now suppose only 50 boxes are sold, but each box is worth ₹200. That means:
50 × ₹200 = ₹10,000
The number of boxes fell from 100 to 50, but the total value is still ₹10,000. Something similar can happen with options.
The size of one contract became bigger. So fewer contracts can be traded even when a large amount of money is still involved.
This is why a fall of more than 50% in the number of contracts does not mean that every part of the options market also fell by more than 50%. It simply tells us that far fewer contracts were traded.
What Does This Mean for a Beginner?
There is a useful lesson here. Options may look easy to start trading because some options have a low price, but a low price does not mean low risk.
Suppose you see an option trading at ₹10. You may think:
“It is only ₹10. How much can go wrong?”
But that ₹10 option can quickly fall to ₹5, ₹2 or even close to zero. This is why beginners should first learn how options work.
Before trading, understand things like:
Lot size — how many units are in one lot.
Option premium — the price you pay to buy an option.
Expiry — the date when the option ends.
Also understand how much money you can lose if the trade goes wrong, and remember that every trade has a cost.
Taking 20 trades does not automatically give you a better chance of making money than taking two trades. Sometimes it simply means you are putting your money at risk more often.
Final Thoughts
Options trading volume fell sharply in FY26 because several changes happened around the same time. Lot sizes became bigger, there were fewer weekly expiry choices, and option buyers had to keep the required money ready before taking the trade.
Some expiry-day trades also needed more money, while trading became more expensive. When all these things came together, traders had fewer chances to take some types of short-term trades, and taking many trades also became harder or more expensive.
That helped bring down the number of options contracts being traded.
For a beginner, however, the biggest lesson is much simpler. Options may be easy to buy, but they are not easy to trade safely.
First learn how they work. Understand how much money you can lose and understand the cost of taking a trade.
And don't think that taking more trades will automatically make more money. Sometimes, taking more trades simply gives you more chances to lose money.
Options may be easy to buy, but trading them safely takes knowledge, patience, and proper risk control. Learn first, understand the risk, and never think that taking more trades will automatically make more money.
