Index options expiry: the settlement price changes on 7 December 2026
A SEBI circular dated 15 October 2026 changes how the settlement price of expiring index and stock derivatives is worked out on expiry day, and resets the closing timetable. Here is what changes for someone who holds a Nifty or Bank Nifty option until expiry.
Published 2 November 2026 · Potoos Research Services
The short answer. From 7 December 2026, on expiry day, the settlement price of expiring index derivatives contracts will be based on the value of the index calculated from the volume-weighted average prices (VWAP) of its stocks during the last 30 minutes of normal trading in the cash market. Trading in the expiring index contracts stops at 3:30 p.m. on expiry day. During those last 30 minutes, the exchanges will publish a running indicative value of the index.
The new rule, in the circular's words
“On the expiry day, the settlement price of the expiring index derivatives contracts shall be determined on the basis of the value of the underlying index calculated using the volume-weighted average prices (VWAP) of the constituent securities during the last 30 minutes of the Continuous Trading Session (CTS) in the equity cash segment. For this purpose, the Stock Exchanges, during the last 30 minutes of the CTS, shall on a real-time basis, compute the indicative value of the underlying index and disseminate the same continuously to the market participants.”
SEBI circular HO/47/11/11(3)2025-MRD-POD2/I/23843/2026, 15 October 2026, para 4.9.1
What it replaces
The circular explains that SEBI's earlier circular of 16 January 2026 introduced the Closing Auction Session (CAS) in the cash market, and specified that settlement prices of stock and index derivatives on expiry day would be based “on the closing prices determined under the CAS framework”. After a consultation paper dated 12 September 2026 and public comments, SEBI decided to change that method. From 7 December 2026, expiry-day settlement moves to the 30-minute VWAP basis quoted above.
What changes if you hold an index option to expiry
- The number your option settles against. On expiry day, an expiring Nifty or Bank Nifty option that you still hold is settled at a price based on an index value worked out from the volume-weighted average prices of the index's stocks over the last 30 minutes of normal cash-market trading. Under the circular, that is the 30 minutes before the closing auction begins at 3:30 p.m.
- You can watch it form. The circular requires the exchanges to compute the indicative value of the index in real time during those 30 minutes and show it continuously to market participants.
- The last moment to trade the expiring contract. On expiry days, “trading in expiring index derivatives contracts shall cease at 3:30 p.m.” Index derivatives that are not expiring that day keep trading until 3:45 p.m.
Stock futures and options
For expiring stock derivatives, the circular says the settlement price will be set by the clearing corporations “on the basis of VWAP of the underlying stock during the last 30 minutes of the CTS in the cash segment across all Stock Exchanges”. Exchanges will also publish a real-time indicative VWAP during those 30 minutes. Trading in stock derivatives continues until 3:45 p.m. on all trading days, including expiry days.
The closing timetable from 7 December 2026
| Time | What happens |
|---|---|
| 3:30 p.m. (1 min) | Reference price calculation, and transition from the Continuous Trading Session to the Closing Auction Session |
| 3:31 p.m. (5 min) | Auction order entry, limit and market orders |
| 3:36 p.m. (4 min) | Auction order entry, limit orders only; market orders cannot be modified or cancelled. Order entry closes at a random moment between 3:38 and 3:40 p.m. |
| 3:45 p.m. | Trading in index and stock derivatives ends (expiring index contracts stop at 3:30 p.m. on expiry day) |
| 3:50 to 4:00 p.m. | Post close session in the cash segment, at the closing price |
Other changes to the closing auction from the same date: only limit and market orders are allowed during the auction, new iceberg orders are not allowed, and stop loss orders cannot be placed. The reference price for the auction is the VWAP of trades in the last 15 minutes of normal trading. One part of the circular, para 4.8, on carrying unexecuted limit and iceberg orders from normal trading into the auction, starts later, on 8 February 2027.
What you can do now
- Note the date: 7 December 2026 for the settlement change and the new timings; 8 February 2027 for para 4.8.
- If you hold index options into expiry, know that the expiring contract cannot be traded after 3:30 p.m. on expiry day under the new timings.
- On expiry days from 7 December, look for the indicative index value the exchanges are required to publish during the last 30 minutes.
- Read the exchange and clearing corporation notices on this change. The circular asks them to update their procedures and to bring the provisions to the notice of market participants on their websites.
New to options? Our option trading for beginners page explains expiry, premium and settlement in plain words.
VWAP (volume-weighted average price) is the average price of a stock over a period, where each trade counts in proportion to how many shares changed hands. Big trades move it more than small ones.
Closing Auction Session (CAS) is a short session after normal trading in which buy and sell orders are collected and matched to set a stock's closing price.
Source
- SEBI circular HO/47/11/11(3)2025-MRD-POD2/I/23843/2026, 15 October 2026, “Review of certain aspects of the Closing Auction Session, market timings and settlement methodology for derivatives contracts”: sebi.gov.in circular page and PDF
Common questions
When does the new expiry settlement price method start?
SEBI's circular of 15 October 2026 says the changes, other than para 4.8, come into effect from 7 December 2026. Para 4.8 comes into effect from 8 February 2027.
How will the settlement price of an expiring Nifty or Bank Nifty option be set?
From 7 December 2026, on expiry day, the settlement price of expiring index derivatives contracts will be based on the value of the underlying index calculated using the VWAP of its constituent stocks during the last 30 minutes of the Continuous Trading Session in the equity cash segment.
Until what time can I trade an expiring index option on expiry day?
Under the circular, trading in expiring index derivatives contracts ceases at 3:30 p.m. on expiry days. Other index derivatives continue until 3:45 p.m.
Does the change apply to stock options and futures too?
Yes. For expiring stock derivatives, the settlement price will be based on the VWAP of the underlying stock during the last 30 minutes of the Continuous Trading Session in the cash segment across all stock exchanges. Stock derivatives trade until 3:45 p.m., including on expiry days.
This page reports what SEBI published. It is not a recommendation to buy, sell or hold any security.