SEBI Proposes Dynamic Options Strike Price Framework To Manage Volatile Market Sessions

Market regulator Securities and Exchange Board of India (SEBI) has proposed a new dynamic framework for managing strike prices of options contracts, seeking to improve trading continuity during volatile market sessions and ensure traders have access to relevant contracts near prevailing market prices.

In a consultation paper released on 25 May 2026, SEBI said the proposal is aimed at addressing operational gaps that emerge when sharp intraday price swings move the underlying asset beyond the currently available strike prices. Such instances can leave market participants without suitable options contracts to trade, which, in turn, affects liquidity and price discovery.

A strike price is the pre-decided price at which an options contract can be exercised. SEBI noted that during high-volatility sessions, the current mechanism may not always add fresh strike prices quickly enough, resulting in a temporary disruption in trading activity.

Fresh Strike Prices To Be Introduced Intraday

Under the proposed framework, stock exchanges will be required to introduce new strike prices intraday in the direction of market movement whenever prices move sharply. This means if the underlying asset rises or falls rapidly during market hours, exchanges must make new options strikes available in real time around the prevailing market level.

The regulator has also proposed that exchanges maintain a minimum number of in-the-money (ITM) and out-of-the-money (OTM) option contracts at all times. Exchanges would additionally need to conduct daily reviews of available strike prices to ensure adequate coverage around the spot price.

Removal Of Inactive Strikes, Flexibility For Exchanges

Alongside adding fresh contracts, SEBI has proposed periodic removal of strike prices that drift too far from current market levels and see limited activity. This is aimed at improving operational efficiency and reducing clutter in the options chain.

The framework would apply across equity derivatives, currency derivatives and commodity derivatives segments.

SEBI has allowed exchanges flexibility in deciding operational details such as:

• Strike price intervals

• The number of strike prices to be introduced

• Wider intervals for strikes far from prevailing market prices

• Periodic review of the framework based on trading activity and liquidity

Importantly, SEBI said these additions or deletions should happen without requiring brokers or market participants to make system-level changes during live trading hours, ensuring minimal disruption to trading infrastructure.

Public Comments Invited Till 15 June

The consultation paper forms part of SEBI’s broader ease-of-doing-business initiative for exchange-traded derivatives. The regulator has invited comments from stakeholders, brokers, exchanges and investors on the proposal.

Market participants can submit feedback on the draft framework till 15 June 2026.

The proposal comes as India’s derivatives market continues to witness strong participation and high trading volumes, with regulators focusing on improving market resilience, smoother execution and better risk management amid sharp volatility episodes.

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Sources

The Economic Times

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