Analyst said this will benefit scalpers, retail traders, and popular stocks like Zee, IDFC First, and Vodafone Idea.
The National Stock Exchange (NSE) will revise the tick size for stock options, effective November 3. What this means is that now the minimum price movement, or tick size, for options on stocks trading below ₹250 will be reduced from ₹0.05 to ₹0.01, while for stocks trading at ₹250 or above, the tick size remains unchanged at ₹0.05.
SEBI-registered analyst Vishal Trehan explained why this move matters and the stocks that may get impacted by this.
What Is A Tick Size?
A tick size defines the smallest increment by which the price of a security or contract can move. For example, if the tick size is 5 paise (₹0.05), the price can move from ₹100.15 to ₹100.20, but not to ₹100.17.
Good News For Options Traders?
Trehan highlighted that this move by NSE improves price precision and help traders to now quote and execute orders in finer increments. It will also lower slippage and would be beneficial for scalpers and directional option buyers. By reducing the minimum price increment, traders can expect improved liquidity as tighter bid-ask spreads encourage more active order books, making it easier for traders to enter and exit positions efficiently
Impact On Popular Stocks
Trehan noted some popular stocks that may see an impact of these revised tick sizes. Zee Entertainment is one such stock that currently trades below ₹250. It will now see its options move in increments of ₹0.01. This move simplifies risk management and facilitates the execution of spread trades.
IDFC First Bank is another stock that garners high retail interest, and currently trades under ₹100. The finer tick pricing offers improved entry and exit prospects for short-term strategies, said Trehan.
Similarly Vodafone Idea is a highly liquid and low-priced stock. Trehan noted that Idea stands to benefit as its options contracts will now allow for more granular scalping, thanks to the ₹0.01 tick size
Trehan also highlighted that this move from NSE brings their regulatory approach in line with global exchanges like CME and Eurex. It would be beneficial for retail traders, market makers, and those deploying systematic strategies. He also added that this change allows for the stability of high-priced stocks, such as Reliance and HDFC Bank, since the tick sizes remain unchanged.
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