We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
No key takeaways from this video 🙂
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1. Introduction to forwards market
00:05:26
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2. Introducing the futures contract
00:06:33
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3. Margins
00:06:29
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4. Leverage and Payoff
00:08:23
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5. Futures trade
00:10:09
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6. Settlement
00:03:59
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7. Open Interest
00:05:25
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8. Shorting futures
00:05:06
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9. Overview of Contracts
00:05:14
What will happen to my balance/trade if I don’t close by position during end of the expiry day
Varun, based on the position, it will be settled accordingly by your broker.
Hi Karthik,
As it is said in the video, that as we approach the expiry date of the futures contract, the margin required increases. Therefore, will the margin become equal to the total contract size of our position on the day of the expiry, since we have to ensure physical delivery on the expiry date?
Yes, it goes up considerably, almost to the extent on contract value, depending on the contract under consideration.
I sold IGL 400 PE @ 3 and currently somewhere at 9 due to sharp fall. Lets say if it goes further down to 380 and by the expiry how the settlement happens exactly. Will I get the stock price at 380 or 400 as I sold the 400 contract. Also how the losses will be adjusted. Please explain with some examples.
Yes, since its an ITM option, short PUT will result in taking delivery of the stock. Hence you need to have the necessary margins in your account.
Please explain me about currency option settlement. For example,
USDINR CONTRACT EXPIREY DATE OCTOBER 30 , 2021
SPOT PRICE ON EXPIRY 77
I SOLD 78 Put , 1 lot
My question is that, how much I need to pay for settlement on expiry.
It depends on the spot price on expiry right?
Hi Karthik,
Can you help to understand last sentence from video “If you are short seller you have to make sure you have those share in your DP account” in futures perspective ?
It means that upon settlement, you will have to deliver shares from your demat account, for which you need to have shares in your DP.
Namaskaram Karthik Sir ,
Sir If I am Long on Infy Futures of November month (for example) . The monthly expiry is on 24 November and on the Day of expiry If I don’t find any buyer what will I do ??
Also , If i decide to Stay on a safer side and square off the Futures position 1 week before the expiry, and I don’t find any buyer, like can this happen and if it happens what Can be Done ??
In that case, the contract will be settled by the exchange. In the 2nd case, if you don’t find a buyer, then you will be stuck with an open position.
So sir , what will happen after that like the position will remain open till expiry but what will happen after the expiry ?
And if the contract is settled by exchange it will be physically settled aur cash settled??
Also sir , Is SEBI planning to remove physical settlement?
After expiry, the contract ceases to exist and, hence, has no value. Stocks are physically settled, index is cash settled. And no, I don’t think SEBI will remove physical settlement 🙂
Please give your views about physical settlement of currency trading i.e. USDINR,GBPINR,EURINR & JPYINR.
Amit, no physical settlement for currencies as there is no spot market for these currencies.
MANY MANY THANKS.
Happy learning!
How much penalty index option writing not exit expiry day? What next?
Please Suggest.
Thanks
There is no penalty. Upon expiry, the contract will cease to exist and will be settled based on the moneyness of the option.
My Put Option (Buy) expired ITM for Wipro. Unfortunately I couldn’t execute and close it. Lot size is 1500. I have around 575 shares in demat and I assumed that for the balance (around 900 shares) I can keep enough Funds as Margin and Zeeodha will settle it for me. Is this how it is or will this be considered Short Delivery and go into Auction? I have enough Funds to cover the Buy. Can someone help understand how this plays out. Many thanks
Settlement in part (stocks + funds), does not happen. YOu’ll need stocks for full settlement.
How are Commodities futures settled? Are they also cash-settled like the Index futures?
How many times can I buy/exit a futures position (same asset) throughout the day if I choose the overnight option (not day trading)?