What is Monthly Expiry? A Simple Guide for Indian Traders

A monthly expiry is a derivative contract that expires once a month, on a scheduled day set by the exchange. All futures and many options in India follow this monthly cycle. Monthly contracts decay more slowly than weekly ones and suit positional trades.

The monthly contract is the traditional backbone of the Indian derivatives market. Futures and many options follow this once-a-month cycle.

Monthly contracts give a trade more time to play out, with slower decay than weekly options. Read on for a simple breakdown built for beginners. You can trade monthly futures and options on Stockk.

Key Takeaways

• A monthly contract expires once a month.
• All futures and many options follow the monthly cycle.
• Monthly options decay more slowly than weekly ones.
• They suit positional and hedging strategies.
• Rollover moves a position to the next month.

Why do traders use monthly contracts?

Monthly contracts give more time for a view to develop, with slower time decay than weekly options. This suits positional and hedging strategies that need weeks rather than days. Stock futures and stock options in India are mainly monthly, which makes them central to most strategies.

Imagine you want exposure to Reliance over several weeks. A monthly contract gives the trade more room than a weekly one, with gentler decay.

What is the monthly rollover process?

As the monthly expiry nears, traders who want to keep their exposure close the current month's contract and open the same position in the next month. This is called rollover. Rollover activity tends to rise in the final days before expiry.

• Rollover: carry a position from the expiring month to the next
• Rollover percentage: how much open interest moved to the next month, read as a sentiment cue

A rollover example

Consider a case where you are long one lot of Reliance futures in the June contract, and June expiry is near. You still believe Reliance will rise over the next month. Instead of letting the contract expire, you roll over: you sell your June futures and buy the July futures in one step. Your view stays alive in the new month, and the small price difference plus costs is your rollover cost.

Weekly vs monthly: which to choose?

Who uses monthly contracts most?

• Positional traders: who hold views for several weeks
• Hedgers: who need steady protection across the month
• Stock derivative traders: since most stock contracts are monthly

If you want to act on futures and options, you can do it through Stockk. Setting up a demat account takes only a few minutes, and Indira Securities handles the backend. Browse the Knowledge Center to keep learning.

Futures and Options are leveraged products and carry a high risk of loss that can be more than the money you put in. This article is only for learning and is not a recommendation to trade in derivatives.

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