Introduction to Zero Day Expiry Options on GIFT City: A Game-Changer for Traders
The NSE International Exchange (NSE IX) at GIFT City has launched an exciting new financial product: Zero Day Expiry (0DTE) Options on the GIFT Nifty 50 Index. This innovative product allows traders to take advantage of daily expiry contracts, providing increased opportunities for hedging, arbitrage, and tailored event positioning.
Traditionally, options in India expired only on specific days, typically every Thursday. However, with the introduction of 0DTE options, traders can now enjoy same-day expiry contracts every trading day, Monday to Friday, increasing flexibility in the Indian derivatives market.
For example:
- You buy or sell the option today, and the contract expires by 3:30 PM IST on the same day.
- Every trading day (Monday to Friday) will now have a new same day expiry contract giving traders and investors more flexibility than ever before.
What Are Zero Day Expiry Options?
In simple terms, Zero Day Expiry Options (0DTE) are options that expire on the very same day they are traded. This means that if you buy or sell a 0DTE option on a given day, the contract will expire by 3:30 PM IST on that same day.
Example:
If you purchase a 0DTE contract today, it will expire by 3:30 PM IST, giving you the chance to capitalize on short-term market moves. This is ideal for traders and investors who seek to take advantage of market volatility within a single trading session.
Key Features of 0DTE Options:
- Underlying Asset: GIFT Nifty 50 Index (USD denominated)
- Expiry: Same-day expiry (0DTE)
- Expiry Time: 3:30 PM IST
- Settlement: Cash settled in USD
- New Contracts Listed Daily: A fresh 0DTE contract will be listed every trading day
- Trading Exchange: NSE International Exchange (NSE IX) at GIFT City
- Regulator: International Financial Services Centres Authority (IFSCA)
Key Note:
On days when a daily expiry coincides with a weekly or monthly expiry, there will be one contract covering all expiries, rather than creating separate contracts for each expiry type. For example, if a weekly expiry and a monthly expiry fall on the same day, the exchange will issue a single contract that serves all purposes.
Who Can Trade 0DTE Options?
Currently, international investors, institutional traders, and IFSC registered entities can trade these contracts. Unfortunately, Indian retail investors cannot access 0DTE options directly from onshore accounts due to the regulations set by FEMA and the RBI’s LRS rules.
This limitation is in place because NSE IX is a regulated international exchange managed in US Dollars, and Indian residents cannot use domestic funds for overseas derivative trading.
Transaction Costs of 0DTE Options
The cost structure for 0DTE options is competitive and appealing to both proprietary and client accounts:
- Proprietary accounts: 5 basis points (“bps”) per side of the option turnover. Means 0.05% per transaction of Buy or sale
- Clients’ accounts: 10 bps per side, plus a regulatory fee of 0.0001% of premium turnover. Means 0.1% per transaction of buy or sale plus 0.0001% regulatory fees.
- Comparative Costs: For proprietary traders, the total roundtrip (Buy and sale) cost is nearly 48% lower than the domestic market (India), making 0DTE options highly attractive for active players.
- Flat Client Costs: For client accounts, costs are similar to India’s onshore options, but those products are unavailable onshore making GIFT IFSC the destination for daily expiry strategies.
Benefits of 0DTE Options for Investors
The introduction of Zero Day Expiry options brings several significant advantages over traditional weekly and monthly expiry options:
- More Trading Opportunities Everyday Counts! Earlier, you had to wait for weekly or monthly expiries. Now, every trading day offers a fresh expiry giving you more chances to trade or hedge.
- Lower Premiums: With virtually no time value, 0DTE options are often far cheaper to buy than longer-dated contracts, enabling users to take speculative positions with less upfront capital.
- Precise ShortTerm Hedging: Have exposure just for today? Use a 0DTE option to protect your position for that specific day without carrying risk overnight.
- No Overnight Risk: You’re in and out on the same day — no surprises from after market news or global events.
- Better Capital Efficiency: Trade short-term market moves using smaller premiums, making your funds work smarter.
- EventBased Trading: Perfect for trading around news, data releases, or market events where volatility is expected within the same day.
Benefits for Investors for investing in GIFT NIFTY
Investing in GIFT Nifty through GIFT City brings the following key advantages:
- Margin Requirements: As the premiums will be lower, margin is also needed to maintain lower. Currently, Nifty options require 5.5% margin in GIFT IFSC versus 12% in Mainland India. There will be no Security transaction Tax no Commodities Transaction Tax levied on transactions done via GIFT City Exchanges.
- Global Access to Indian Markets: Through GIFT City, international traders get exposure to Indian indices in a globally regulated, taxefficient environment.
- Tax Benefits: There will be No STT, CTT, Stamp Duty, or GST applied to trades on GIFT City exchanges. Additionally, Capital Gains from transactions by non-residents are exempt, offering a virtually tax-free trading environment for global investors.
Risks Associated with 0DTE Trading
While 0DTE options offer several advantages, they come with inherent risks:
- High Volatility Exposure: Because these options have only a few hours of lifespan, even small price fluctuations in the underlying index or asset can cause major swings in value, resulting in rapid gains or steep losses.
- Leverage and Amplified Losses: 0DTE options can be leveraged instruments, meaning small capital outlays control large positions; this can amplify losses if trades move even slightly against the trader’s expectations
- Liquidity Risk in Volatile Markets: While usually liquid, during extreme volatility or event-driven sessions, bid/ask spreads can widen sharply, making it difficult to exit positions at expected prices.
- Limited Time for Recovery: Because contracts expire the same day, there is no opportunity to hold positions overnight for recovery; once the expiration clock runs out, losses are final, closing out the trade completely.
Key Considerations When Trading 0DTE Options
0DTE options are designed for experienced traders and institutional players. These products are fast-moving and require timing and risk control. Liquidity may take time to build, and effective risk management is crucial. Beginners should approach these products with caution.
Conclusion
The introduction of Zero Day Expiry options at GIFT City represents a significant step in making India’s financial markets more competitive with global markets that already offer daily expiries. It provides traders with flexibility, speed, and precision, allowing for tailored, short-term market strategies and event-driven trades.
These products reduce costs, eliminate overnight risk, and offer better capital efficiency, making GIFT City a premier destination for global investors seeking a tax-efficient, regulated trading environment.