Future and option (F&O) traders on the stock market will need to exercise extra caution starting in the following fiscal year because the NSE has decided to end the “Do Not Exercise” (DNE) option for them as of March 30, 2023. Since the stock market will be closed on March 30 to observe Ramnavmi across the country, this month’s expiration will occur on March 29, 2023. So, the DNE facility will be available until March 29, 2023, when it will expire, and stock option traders won’t have access to it starting the next month. However, traders of Index Option will still have access to the feature.

The lack of an auto square off capability following the expiration of a monthly option in stock option transaction, in the opinion of stock market experts, will have a negative effect on the volume of option trades.The NSE’s action, they claimed, will discourage high-risk option trading and encourage cash trading, which is better for investors and traders who are willing to take less risk.

Avinash Gorakshkar, Head of Research at Profitmart Securities, commented on how the NSE’s decision to discontinue the DNE service may affect F&O traders in India, saying, “Under the current DNE facility, a stock option trader gets the opportunity of auto square off. Therefore, if an option trader closes out their position after the strike, it will automatically be squared off, and they will only be responsible for paying the margin used for the strike. But, as of the next month, this auto square off facility won’t be provided, and in such event, one’s position will be delivered for settlement.

Explaining how it will impact F&O traders, Anuj Gupta, Vice President — Research at IIFL Securities said, “Suppose you hold a call option at ₹2000 with a lot size of 300. In absence of DNE facility, if you left your strike open then you will have to cough up ₹6 lakh ( ₹2000 x 300) to take delivery under new NSE F&O rules applicable from next month.”