Comment on Policy on settlement of compulsory delivery derivative contracts
commented on
24 Aug 2019, 03:25 AM
Hi,
I have the following open positions:
1. IDEA AUG CE with strike price 8. Idea spot is currently at 5.75.
2. I am long BANKNIFTY AUG FUT which I bought at around 28463 and I also purchased a BANKNIFTY AUG 28400 PE as a protective put to reduce the downside risk.
Today, I suddenly get this mail with subject: “Positions in contracts with compulsory physical delivery”.
Now, my question is,
A) Does this physical delivery compulsion apply to BANKNIFTY? I think not because index futures aren’t physically deliverable as far as I know. So is it safe to assume that the BANKNIFTY FUT AND PE would be cash settled upon expiry?
B) Where do I stand with regards to IDEA CE? It is an OTM CE as of now. Will it be squared off automatically on the next trading session? Because I don’t think I have the necessary margin requirement. Also the F&O margin calculator of ZERODHA doesn’t show the SPAN and Exposure margins required for long options. It only displays margin requirements for short options.
Kindly advise as to what I should do avoid to avoid catastrophic damages. I have no intention of purchasing the stock and the purchase of the IDEA 8 CE was purely to benefit from premium rise if any prior to expiry. Awaiting reply.
Regards,
Abudhar al Hassan.