The National Stock Exchange’s weekly options on the Nifty and Sensex have traditionally settled using a volume‑weighted average price (VWAP) that is calculated from intraday trades. On expiry days, the price is taken from the last traded price of the underlying index, a method that has been criticized for being susceptible to manipulation and for producing erratic settlement values. In a move that could reshape the settlement mechanics, the NSE has issued a consultation paper asking for comments on whether to revert the weekly options to the old volume‑based price mechanism used for monthly stock futures and options.
The proposal would combine VWAP with an auction‑based price on expiry, aiming to reduce volatility and improve fairness. For retail traders, the change could mean more predictable settlement prices and less exposure to last‑minute price swings. However, it could also increase the cost of hedging for those who rely on the current VWAP system, as the auction component may widen the spread.
Market makers might adjust their quoting strategies, potentially tightening liquidity during the critical expiry window. The regulator’s decision will be announced after the consultation period closes, and it could set a new precedent for how Indian derivatives are priced. Investors should monitor the outcome closely, as it may influence the cost of options strategies and the overall efficiency of the market.