Comment on Policy on settlement of compulsory delivery derivative contracts — Update Oct 2019
commented on
21 Apr 2020, 07:47 PM
Ferdi,
While theoretically, you can choose not to exercise an option, it doesn’t make sense not to exercise an option that is deep ITM(usually, more than 5% of the contract value).
For CTM, we don’t exercise if the required margin is not sufficient or if there are no holdings in the demat account(in case of give delivery) or if the intrinsic value of the contract is lower than the STT brokerage and other charges being charged for the physical settlement.