F&O Expiry Date Explained: Everything Traders Need to Know

If you trade in Futures and Options (F&O), the expiry date is not just a calendar detail. It can quietly decide whether a trade works in your favour or turns against you. Prices behave differently as the expiry date comes closer. Volatility increases. Liquidity shifts. Decisions that looked safe a week ago suddenly need rethinking.

Many new traders ignore expiry dates until the last moment. That’s when problems start. Losses appear suddenly, positions are squared off by the broker, or trades get settled without any preparation. The expiry date quietly influences prices, margin levels, overall risk, and even the mindset of traders in the market.

Understanding how F&O expiry works helps you stay prepared instead of reacting in panic. This guide explains the same in simple terms. Right from what it means, what happens on the final day, and why you must pay so much attention to it, you will explore everything here.

What Is an F&O Expiry Date?

The F&O expiry date is the last day until which a futures or options contract is valid. After this date, the contract no longer exists. You either settle it, roll it over, or let it expire.

For example, if you buy a Nifty futures contract expiring on the last Thursday of the month, that contract ends on that day. You cannot hold it beyond that point. The same applies to options contracts.

Most index and stock F&O contracts in India expire on fixed dates decided by the exchange. These dates are known well in advance, which gives traders time to plan.

Expiry is not just an ending. It’s a turning point where contracts are settled, and positions are closed or moved forward.

Meaning of F&O Expiry

F&O expiry is basically the point where a contract comes to an end. After that day, it can no longer be traded and has to be settled.

In the case of futures, this settlement usually happens in cash, though some contracts may result in actual delivery instead. For options, expiry decides whether the option has value or becomes worthless.

If an option expires “in the money,” it has value. If it expires “out of the money,” it disappears with zero value.

What Happens on the Expiry Date?

On expiry day, trading volume often spikes. Prices move faster. Traders rush to close, adjust, or roll over positions.

Futures contracts are settled. Options either get exercised automatically or expire worthless. Brokers may square off risky positions if margins fall short.

By the end of the trading session, all expiring contracts are settled. After that, they vanish from the trading screen. What remains is profit, loss, or a lesson learned.

Difference Between Futures and Options on Expiry

Futures do not disappear quietly. They must be settled. Either you close the position, roll it to the next expiry, or let it settle automatically.

Options behave differently. They give a right, not an obligation. On expiry, an option either has value, or it doesn’t. If it has value, it is exercised. If not, it expires at zero.

This difference makes options risk-limited but time-sensitive. Futures carry obligation till the very end.

Why Expiry Dates Matter in F&O Trading?

Those into F&O trading know the significance of expiry dates. They determine the life span of a contract and influence through time decay and volatility. As expiry approaches, the option's time value reduces. This is called time decay. Futures prices slowly move closer to the spot price.

Risk also changes near expiry. Small price moves can create large gains or losses. Margins may increase. Volatility can spike without warning.

Traders who understand expiry dates can plan exits better. They help avoid last-minute surprises. Ignoring expiry can sometimes prove detrimental.

Types of F&O Expiry in India

In India, F&O contracts do not all expire on the same schedule. Some wrap up within a week, while others run for a full month. This setup allows you to pick contracts that suit your strategy and how long you want to stay invested. The exchange clearly sets these expiry dates in advance, so there are no surprises.

Here are the main types of F&O expiry in India:

Weekly Expiry

Weekly expiries are related to short-term F&O contracts that expire every week. These are popular in index options trading. For example, Nifty and Bank Nifty options expire every Tuesday.

Contracts with weekly expiries offer quick opportunities but come with fast time decay. Prices change rapidly. They usually suit traders who prefer short-term setups and active monitoring.

Monthly Expiry

Monthly expiry is the most common type. It is related to contracts that expire every month. For example, most stock options contracts in India expire on the last Thursday of the month.

Contracts with monthly expiries are widely used by positional and swing traders. Liquidity is high, and pricing is relatively stable compared to weekly contracts.

Quarterly Expiry

Quarterly contracts expire once every three months. These are mostly used by institutions and long-term hedgers.

Retail participation is lower, but they offer longer holding periods with fewer rollovers.

What Happens to Futures on Expiry?

Futures contracts cannot be ignored on expiry. They must be settled. You can either settle a Futures contract before it expires, or the exchange will do it for you..

The exchange will settle a futures position at expiry, based on pre-determined rules. This is typically done in the way of a cash settlement, although delivery may be applied in some situations.

Cash Settlement Mechanism

The majority of index futures are settled in cash upon expiration. This implies that there is no physical settlement occurring.

The loss or gain is worked out by finding the difference between the contract price and the final settlement price. It is directly credited or debited from your trading account.

Closing or Rollover of Futures Contracts

To close a futures contract is to reverse your position before its expiration. Rollover involves exiting the current futures contract and purchasing another one with next-month expiration.

Rollover helps you continue the trade without facing settlement. It is common close to expiry.

What Happens to Options on Expiry?

Options behave very differently on expiry day. Everything depends on where the price stands compared to the strike price.

Some options get exercised automatically. Others expire worthless. There is no middle ground once trading ends.

Understanding how each type behaves is critical.

In-the-Money (ITM) Options

ITM options have intrinsic value. These are automatically exercised on expiry unless the trader opts out.

For index options, this leads to cash settlement. For stock options, it may lead to the physical delivery of shares.

At-the-Money (ATM) Options

ATM options sit right at the strike price. On expiry, even a small price change decides their fate.

Often, ATM options expire with little or no value. Timing matters the most here.

Out-of-the-Money (OTM) Options

OTM options have no intrinsic value. On expiry, they expire worthless.

The premium paid is lost entirely. This is why buying OTM options close to expiry carries high risk.

Risks Associated with F&O Expiry

Expiry brings its own set of risks. Volatility increases. Prices move sharply in short time frames. Liquidity can dry up suddenly.

Time decay accelerates for options. Futures may see unexpected price convergence. Margin requirements can rise without warning.

There is also execution risk. Delayed decisions can lead to forced square-offs by brokers. Emotional trading becomes common.

Being aware of these risks helps you stay calm and make meaningful trading decisions.

Important Rules Related to F&O Expiry

The Securities and Exchange Board of India (SEBI) and the stock exchanges have defined certain rules for F&O settlements upon expiry. These rules are meant to reduce risk and ensure smooth settlement. Every trader should be aware of them.

Auto Square-Off Rules

The auto square-off rule allows brokers to automatically settle F&O contracts when approaching expiry. This usually happens between 3:15 and 3:25 PM on the expiry date.

The goal is to avoid settlement risk, but it can lead to unexpected exits.

Margin Requirements on Expiry Day

Margins often increase on expiry day. This is done to control risk from sudden price movements.

If margins fall short, brokers may square off active positions without notice.

Physical Delivery Rules for Stock Futures & Options

For stock derivatives, physical delivery applies on expiry. Shares are delivered into the Demat account of the trader. ITM contracts are mandatorily settled with actual shares, not cash.

If you are holding a long position, you must take shares. If you are holding short positions, you must sell shares.

Settlement Process on F&O Expiry

Settlement is after-market on the expiry day. The exchange calculates final prices and decides on gains and losses.

In the case of cash settled contracts, positions are closed and realised profits or losses are added or deducted from the trader’s account. In case of physically settled contracts, stocks are debited from or credited to the Demat account.

The process is automated, but preparation is manual. Knowing what you hold makes all the difference.

Role of Clearing Corporations

Clearing corporations act as the backbone of the settlement process. They ensure that every trade is honoured, even if one party defaults.

They calculate obligations, manage margins, and complete settlements smoothly. This builds trust in the system.

Understanding F&O expiry, related rules, and roles is critical. It helps you trade with clarity and make well-informed trading decisions.