Comment on Policy on settlement of compulsory delivery derivative contracts — Update Oct 2019
commented on
29 Mar 2020, 11:04 PM
Mangal,
1. Yes, this month we had to block 100% of the delivery margins given the increased volatility in the markets. This is otherwise twice the SPAN+Exposure margins(on normal months).
2. Yes, we will have to square the position if there is a margin shortfall.
3. That’s right, your account will be charged for the full amount. Interest will be charged on the debit balance in your account.
4. The assignment depends on the moneyness of the option contract you shorted. Like in this case, the option is deep ITM, so it is likely that you get assigned. Say HDFC closed at 818 and the strike is 820 PE, the chances of assignment are lower as it is not beneficial to the option buyer to take/give assignment as the delivery cost(STT, carryforward risk, etc) is higher than the intrinsic value.