What Happens on F&O Expiry Day: A Step-by-Step Walkthrough
Expiry day brings sharp volatility and automatic settlement. Here's exactly what happens to your F&O positions, step by step.
The short version: expiry day is when futures and options contracts stop trading and get settled. Volumes spike, volatility rises, and positions get squared off automatically if you haven’t closed them yourself. Here’s exactly what happens, hour by hour.
Why expiry day feels different
Every F&O contract has a fixed expiry date. It’s typically the last Thursday of the month for monthly contracts, with weekly expiries on specific indices too. As expiry nears, traders rush to close, roll over, or settle their positions.
This concentrated activity increases trading volume sharply. It also tends to increase intraday volatility, especially in the final hour of trading.
What happens to options as expiry approaches
Time value, or Theta, decays fastest in an option’s final days. Out-of-the-money options can lose most of their remaining value quickly, sometimes within the last trading session.
At expiry, options are either exercised automatically if in the money, or they expire worthless if out of the money. Most retail traders close their positions before this final settlement, rather than letting it happen automatically.
What happens to futures at expiry
Futures contracts are settled based on the closing price of the underlying asset on expiry day. If you haven’t closed your position, it gets automatically settled. The profit or loss is then credited or debited to your account.
Many traders choose to “roll over” their position instead. This means closing the expiring contract, and simultaneously opening a similar one in the next month. It maintains their market exposure without an actual settlement.
Why prices can behave oddly near the close
The final minutes before expiry sometimes see unusual price behavior. This is partly due to large institutional positions being squared off. It’s also partly due to arbitrage activity between the futures and cash markets.
Many experienced traders avoid opening large new positions in the final hour of an expiry session. Price moves during that window can be sharp, and hard to predict.
Practical tips for expiry day
If you’re holding F&O positions you don’t want automatically settled, close or roll them over well before the final hour. Don’t wait until the last few minutes.
Keep extra margin available too. Expiry-day volatility can trigger margin calls faster than a typical trading day, especially for leveraged positions.
| Position type | What happens if not closed by expiry |
|---|---|
| In-the-money option | Automatically exercised |
| Out-of-the-money option | Expires worthless |
| Futures contract | Settled at closing price, automatically |
Related reading
- Options Greeks Explained: Delta, Theta, Gamma and Vega for Beginners
- What Is Open Interest in Options Trading and How to Read It
Frequently asked questions
When does monthly F&O expiry typically happen in India?
Monthly contracts typically expire on the last Thursday of the month, though this can shift for holidays, and weekly expiries exist for specific indices.
What happens if I don’t close my option position before expiry?
In-the-money options are automatically exercised, while out-of-the-money options simply expire worthless, with no action needed from you.
Why does trading volume spike on expiry day?
Traders rushing to close, roll over, or settle positions before the deadline concentrates activity into that single session, increasing both volume and volatility.
What does it mean to ‘roll over’ a futures position?
It means closing your expiring contract and simultaneously opening a similar one in the next expiry cycle, to maintain exposure without a full settlement.
Is it risky to open new F&O positions during the last hour of expiry?
Many experienced traders avoid it, since price behavior can be unusually sharp and unpredictable during that final settlement window.