Option Lot Size and Contract Specs: India Focus Guide
Lot size is the fixed quantity of the underlying packed into one options contract, and in India you can only trade whole multiples of it. There is no such thing as buying one share worth of a Nifty option.
Contract specifications are the exchange’s rulebook for a derivative: underlying, lot size, strike interval, tick size, expiry day, settlement method and exercise style. Every one of those fields changes what a trade costs and what happens on expiry day, and all of them are published on the NSE contract specifications pages.
Ahead: how to read a spec sheet, what one lot really costs, why premium and contract value and margin are three unrelated numbers, and the expiry mechanics that destroy small profits.
Reading a contract specification sheet
Every listed contract has one. It is short, dull, and skipping it is how traders find surprises on expiry day.
| Field | What it means | Why it matters |
|---|---|---|
| Underlying | The index or stock the option tracks | Index options are cash settled, stock options physically settled |
| Lot size | Units per contract | Sets your minimum ticket and rupee risk per point |
| Tick size | Smallest price step, commonly Rs 0.05 | Tick multiplied by lot size is your smallest possible gain |
| Expiry | The day the contract stops trading | Revised by exchanges, so confirm before entering |
| Exercise style | European for NSE index and stock options | No early assignment, exercise only at expiry |
| Settlement | Cash for index, delivery for stocks | Decides whether you need shares or money on expiry |
The exercise style line deserves a pause. Because NSE index and stock options are European, a seller cannot be assigned early however deep in the money the option goes. Our comparison of American and European style options explains why that matters for a short position.
Worked example: what one lot actually costs
Suppose you want a Nifty 25,000 call. Assume, as an illustration, a lot size of 75 and a premium of Rs 120. Lot sizes are revised periodically, so confirm the current figure on the exchange website.
- Premium payable: Rs 120 multiplied by 75, so Rs 9,000. As the buyer, that is your maximum loss.
- Contract value: 25,000 multiplied by 75, so Rs 18,75,000. Notional exposure, not money you pay.
- Value of one tick: Rs 0.05 multiplied by 75, so Rs 3.75 per lot.
- Value of a 10 point premium move: Rs 10 multiplied by 75, so Rs 750.
- Breakeven at expiry: 25,000 plus 120, so Nifty must close above 25,120.
Trade three lots and premium becomes Rs 27,000, with every one point move worth Rs 225. Lot size turns a small looking premium into a position that moves faster than your account can absorb.
Premium, contract value and margin are three different numbers
Premium
What the buyer pays and the seller receives, settled as premium multiplied by lot size. If you buy options this is your entire cash outlay. How it splits into intrinsic and time value sits in our piece on what makes up an option premium.
Contract value
Strike or spot multiplied by lot size, so Rs 18,75,000 above. It never leaves your account on an index option, but several charges are computed on it.
Margin
Only sellers post margin. The clearing corporation sets SPAN margin from a portfolio risk model and adds exposure margin on top, recalculated intraday as volatility shifts. Buyers pay premium and nothing else. The mechanics are in our guide to options margin requirements.
Beginners confuse the three, decide they risk Rs 9,000, then get a margin call because they sold rather than bought.
Why do lot sizes and expiry days keep changing?
Exchanges revise lot sizes to keep contract value inside a policy band. When an index or stock rises a lot, the same lot means much larger rupee exposure, so the lot gets cut. When it falls, the lot may be raised.
Expiry schedules also get revised, including which weekday weekly contracts expire on and how many weekly expiries exist. Both have changed more than once recently.
The rule: never size a position off a lot size you memorised last year. Open the contract specification or your broker’s contract master. Then check the expiry calendar, because a contract expiring tomorrow behaves nothing like one expiring in three weeks, as our explainer on how options expiration works sets out.
What happens if I let an in the money option expire?
Index options settle in cash against the final settlement price. Say your Nifty 25,000 call is alive at expiry and Nifty settles at 25,060. Intrinsic value is 60 points, so your payout is 60 multiplied by 75, which is Rs 4,500.
Now the tax. STT on the sale of an option is 0.15% of premium. Square off at a premium of Rs 60 and premium value is Rs 4,500, so STT is Rs 6.75. Trivial.
Let it expire and get exercised, and the 0.15% applies to settlement value instead, paid by the buyer. Settlement value is 25,060 multiplied by 75, which is Rs 18,79,500. STT at 0.15% on that is Rs 2,819. Your Rs 4,500 payout shrinks to about Rs 1,681.
Same market, same position, and expiry cost roughly Rs 2,812 more than pressing the sell button. Traders call this the STT trap. Confirm the exact base from your contract note, but treat the principle as settled: square off small in the money options.
Stock options add a second problem. They are physically settled, so an in the money stock option becomes an obligation to deliver or receive shares. With a lot of 500 shares at Rs 2,400, that is Rs 12,00,000 of stock to fund. Brokers raise delivery margins in expiry week and may square off positions themselves, but the responsibility is yours.
A pre-trade checklist
- Pull the current lot size from the exchange, not from memory.
- Multiply premium by lot size. If that number worries you, cut lots, not your stop.
- Work out the value of one point of premium.
- Note the expiry date and whether the contract is weekly or monthly.
- Check whether the underlying is an index (cash settled) or a stock (physically settled).
- Decide the exit in advance, and plan to square off rather than expire.
A plain risk note: options carry built in leverage. Buyers can lose the entire premium, and sellers face losses not capped by the premium received. F&O income is non speculative business income reported in ITR-3, so keep your contract notes.
Frequently Asked Questions
Can I buy less than one lot of an option in India?
No. The exchange defines the market lot and every order must be a whole multiple of it. There is no fractional or single unit trading in Indian listed options. If one lot exceeds your risk budget, the correct response is to stay out of that contract rather than hunt for a smaller size that does not exist.
Where do I find the official lot size for a contract?
The NSE contract specifications page for each underlying lists the current market lot, tick size, strike interval and expiry structure. Your broker also publishes a contract master file with the same fields for every live contract. When the two disagree, the exchange file is the authority.
Does lot size affect how much margin I need?
Yes, directly. Margin is computed on the position, and a larger lot means larger notional exposure, so SPAN and exposure margin scale with it. If the exchange doubles a lot size, margin for one lot roughly doubles too. Option buyers are unaffected, since they pay only the premium.
Why are some strikes missing from the option chain?
Strike interval is the gap between consecutive listed strikes, and it widens as you move away from the current price. Near the money strikes are listed densely because that is where trading concentrates. Far strikes are spaced more widely, which is why the exact level you had in mind sometimes does not exist.
Why did my broker square off my stock option before expiry?
Because stock options are physically settled and your account probably lacked the funds or shares to honour delivery. Brokers escalate delivery margin requirements through expiry week and close out positions that cannot be settled. Read your broker’s physical settlement policy at the start of expiry week, not on Thursday afternoon.
Key Takeaways
- Lot size turns a quoted premium into real money. Premium multiplied by lot size is what leaves a buyer’s account.
- Contract value, premium and margin are three separate numbers. Confusing them is the fastest route to an unexpected margin call.
- Lot sizes and expiry schedules are revised periodically, so verify both before every new position.
- Square off small in the money options. STT of 0.15% on settlement value can dwarf the same rate applied to premium.
- Index options are cash settled. Stock options are physically settled, so an in the money stock option becomes a delivery obligation.
- NSE index and stock options are European style, so a short position cannot be assigned before expiry.
