Sebi proposes framework for option strike prices during market volatility

Sebi has proposed a new framework for managing strike prices in options contracts during periods of sharp market volatility. The proposal includes daily reviews, intraday introduction of strike prices and updated rules for exchanges across equity, currency and commodity options segments

New Delhi: Capital market regulator Securities and Exchange Board of India on Monday proposed a comprehensive framework for the introduction and ongoing management of strike prices in options contracts to ensure the availability of contracts during periods of sharp intraday market volatility.

In a consultation paper, Sebi said significant volatility in underlying or futures prices can lead to market movements beyond the farthest available strike price, causing inconvenience to market participants due to the non-availability of options contracts around prevailing market levels.

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To address this issue, the regulator proposed that stock exchanges put in place a framework governing the introduction and management of options contracts.

Under the proposed framework, exchanges will formulate rules for a minimum number of in-the-money and out-of-the-money options contracts and undertake daily reviews of strike prices around prevailing market levels.

Stock exchanges will also review existing strike prices daily to eliminate contracts that are significantly away from prevailing market prices, according to the consultation paper.

Further, Sebi has proposed that exchanges should have provisions for the intraday introduction of new strike prices during market hours in the direction of movement of the underlying asset.

The regulator said such intraday introduction of options contracts should not require any system-level changes by stock brokers or market participants during live trading operations.

According to Sebi, the operational modalities, including strike intervals, the number of contracts to be introduced and wider intervals for contracts far away from the prevailing market price, will remain at the discretion of individual exchanges.

The proposed framework will apply across all options segments, including equity, currency and commodities, with exchanges allowed to adopt different rules depending on liquidity and participation in specific sub-segments.

Sebi has also proposed discontinuing an existing clause related to the rationalisation of strike intervals for long-dated index options after operationalisation of the new framework.

The Securities and Exchange Board of India has invited public comments on the proposals until June 15, 2026.