NSE has announced to increase the futures lot size of Nifty, Bank Nifty, Fin Nifty and many other indices. NSE has increased the lot size of futures contract by up to three times. The exchange has increased the lot size as per SEBI's circular dated October 1. SEBI had said that the value of futures contract in the index should be between Rs 15 to 20 lakh.

How much has the lot size increased?
 

NSE has said that from November 20, all new index futures contracts will be issued according to the revised lot size. However, some monthly, quarterly and half-yearly contracts already issued will remain in the current lot size till their expiry. Even though NSE has decided to change the lot size from November 20. But because of the contracts issued earlier, the contract will take different time to expire according to the new lot size. No contract will be able to expire according to the new lot size before January 2 next year. And it will also happen that contracts with both new and old lot sizes will be available at a time. First expiry according to the new lot
 

What is the effect of increasing lot size on traders?

The current price of Nifty is 24854. According to this, the contract value of Nifty is
24854X25=Rs. 6,21,350. If the price remains the same, then from November 20, the contract value will be 24854X75=Rs. 18,64,050. According to the new lot size, the contract value of all other indices will also increase. Understand how?
 

More money for trading
After the increase in lot size, traders will need up to three times more money to enter the index futures trading. Let us explain to you how much minimum money will be required for trading.

Margin on Nifty futures
 

In this way, three times the amount will be required for Nifty options trading also.
 

According to Chandan Taparia, Senior Vice President, Derivatives and Technical, Motilal Oswal, increasing the lot size of NSE will increase both risk and reward. This will increase the difficulties of small traders as they will need more money. Especially retail traders who trade with one lot each may be out of the system. This can also affect the volume of the exchange.

According to veteran trader Asit Baran Pati, due to increase in lot size, traders will reduce their quantity. Also, increasing lot size will reduce averaging. For example, many traders like to enter an option at different prices. Currently, there can be 12 entry points in a move of 300 points. If the lot size is 75, they will get only 4 entry points.

According to Asit Baran Pati, it is going to be most difficult for those who used to buy Nifty ETFs and sell calls under the covered call strategy. Till now, they used to buy Nifty ETFs worth Rs 6.5 lakh and make covered calls. But if the lot size is 75, he will have to invest at least Rs 19 lakh. Then he will be able to make a covered call with one lot.