Policy on settlement of compulsory delivery derivative contracts — Update Oct 2019
What does compulsory physical delivery mean?
As stated in this SEBI circular, starting from July 2018 expiry, F&O positions are being settled moved from cash settlement mode to compulsory physical delivery settlement in a phased manner. Starting from October 2019 expiry, all stock F&O contracts will be compulsorily physically settled. If you hold a position in any Stock F&O contract, at expiry, you will be required to give/take delivery of stocks.
The deliverable quantity is computed as under
-
- Unexpired Futures
- Long futures shall result in a buy (security receivable) position
- Short futures shall result in a sell (security deliverable) position
- In-the-money call options
- Long call exercised shall result in a buy (security receivable) position
- Short call assigned shall result in a sell (security deliverable) position
- In-the-money put options
- Long put exercised shall result in a sell (security deliverable) position
- Short put assigned shall result in a buy (security receivable) position
- Unexpired Futures
The quantity to be delivered/received shall be equivalent to the market lot * the number of contracts that result in a delivery settlement.
This is a significant change to how these contracts were settled earlier – by cash. Also, since most people trading F&O usually have just a small portion of the overall contract value blocked as margins (Futures and Short Options) or premium (Long calls & puts), the actual obligation of taking or giving delivery can be exponentially higher. This increases the risk for us as a brokerage firm significantly. Below is our new policy on physically settled derivative contracts which is part of our broader RMS (Risk Management) policy.
Our policy
Futures and Short Option (Calls & Puts) positions
- The margin requirement for all Stock F&O contracts will be increased on the expiry day to 40% of the contract value or SPAN + Exposure margins prescribed by the exchange(whichever is higher).
- These margins will be debited on your trading ledger. The increase in exposure margin is to cover for the additional obligation that will arise if these contracts are held until expiry and result in physical settlement.
- For example, if the margin required for Allahabad Bank futures is normally 25% as SPAN+Exposure of the contract value, it will be 40% of the contract value on Thursday(expiry day).
- You can check for the increased margin requirement on our SPAN margin calculator.
Long/Buy option (Calls & Puts) positions
- There will be a physical delivery margin charged for all In-the-money(ITM) long options. This will be 50% of the contract value.
- Exchanges have defined Close to money (CTM) contracts which are a subset of ‘in the money (ITM)’ or contracts that expire with some intrinsic value.
- For Call Options – 3 ITM options strikes immediately below the final settlement price shall be considered as ‘CTM’. For example, if Wipro contract settles at 243 on expiry day, call options with strike 230, 235, and 240 will be marked as CTM contracts
- For Put Options – 3 ITM options strikes immediately above the final settlement price shall be considered as ‘CTM’. For example, if Wipro contract settles at 243 on expiry day, put options with strike 245, 250, and 255 will be marked as CTM contracts
- For long ITM Put options, you will be allowed to carry your position until expiry if you maintain sufficient margins as explained above. An exercised Put option would result in you having to deliver shares to the Exchange. As such,
- If you hold the shares in your demat account, such shares will be debited towards meeting the Exchange settlement obligation.
- If you don’t hold the shares in your demat account, you wouldn’t be able to deliver the shares towards the physical delivery obligation, resulting in short delivery. Appropriate auction penalties from the Exchange shall be charged on your account for such short deliveries. Read more on the consequences of short delivery here.
OTM (Out of the money) options are those strikes that are above the final settlement price for calls and below the final settlement price for puts. There won’t be any delivery obligation if your call or put option expires out of the money(OTM).
Policy regarding Close to Money contracts (CTM)
Exchanges have provided an option to not exercise long CTM contracts. We will be using this option on expiry day in case the cash balance and the intrinsic value of the option contract is less than twice the SPAN+Exposure margin (Exchange mandated) required to take a position in the futures contract of the same stock for the current expiry.
For example: If you are long 1 lot of WIPRO Oct 19 240 CE and let it expire and WIPRO(Stock) settles at Rs. 243, this contract will be a CTM contract. The intrinsic value of this contract will be 3 [243-240] x 3200(lot size) = Rs 9600.
Post-market closing we will check if the client’s free balance (Cash balance + Rs 9,600) > Rs 3,11,040 ( 40% of the contract value or twice the SPAN +Exposure margin for WIPRO Oct future contract). If client balance is lesser than Rs 3,11,040, this position will be marked as “Do not exercise” and the option contract will expire worthless. If the balance is more than the required margin, we will let the option be exercised, resulting in physical delivery. All costs arising out of such delivery obligations will be applied to the client’s account.
Update: NSE has released this circular discontinuing the DNE (Do not exercise) facility for CTM contracts from October 14, 2021.
In the money contracts (ITM)
All ITM contracts which aren’t CTM will be mandatorily exercised by the exchange. This means that anyone holding an ITM option contract will receive/give delivery of stocks depending on whether one is holding call/put options. All the costs arising out of this delivery obligation will be applied to the client’s account.
Out of the money contracts (OTM)
All OTM options will expire worthless. There will be no delivery obligations arising out of this.
Spread and covered contracts
Spread contracts that result in both – take and give delivery obligation will be netted off for the client. For example, you have a bull call spread of Reliance of the same expiry, a lot of long call options of strike 1300 and a lot of short call options of strike 1320 and the spot expires at 1330, this will result in a net-off and there won’t be any delivery obligation. Here a few cases highlighted below which will result in a net-off of physical delivery obligation for contracts of the same expiry.
| 1st Leg | 2nd Leg |
| Long Futures | Short ITM Call Long ITM Put |
| Short Futures | Long ITM Call Short ITM Put |
| Long ITM Call | Long ITM Put Short ITM Call |
| Long ITM Put | Long ITM Call Short ITM Put |
| Short ITM Call | Long ITM Call Short ITM Put |
| Short ITM Put | Short ITM Call Long ITM Put |
Margins will be charged separately on all legs of spread contracts(credit and debit spreads, iron condors, etc) and for covered call positions given the risk on the broker(Zerodha) that you can exit one of the legs of the spread before expiry leading to a physical delivery obligation. You will still continue to receive SPAN margin benefit for the contracts(if any).
Random Assignment of short CTM Position
In case you’ve written an option that expires ‘in the money’ and have left such position to expire, the assignment of such CTM option is done randomly by the Exchange. In the event that your option contract does not get assigned, you are entitled to retain the premium. However, if an option gets assigned to you, you will have to give/receive delivery of stocks depending on whether you have written a call/put option.
Buy/Sell price of the physically settled stocks
The expiry day will be the buy/sell date of the shares that have undergone physical delivery. The buy/sell price for the various cases is as below-
- Long/short futures- The settlement price on the expiry date will be the buy/sell (average) price of the stocks.
- Call/Put options – ITM options get exercised but expire at 0 value. The strike price of the contract will be the buy/sell (average) price of the stocks.
Additional costs of physical delivery
- All positions that result in you receiving delivery of shares will require you to have funds equivalent:
- For Futures: Settlement Price * Lot Size * Number of lots
- For Options: Strike Price * Lot Size * Number of lots
- All positions that result in you having to give delivery of shares will require you to have shares in your demat account equal to the deliverable quantity. In the event that you do not have the required quantity of shares, this settlement would result in a short delivery. Appropriate penalties shall be charged on such short deliveries. This can be as much as 20% or more. Read more on the consequences of short delivery here.
- Margin penalties will be charged as prescribed by the exchange for all F&O positions(including long options contracts).
- Since there is a substantial increase in effort and risk to settle these F&O positions resulting in physical delivery, a brokerage of 0.25% of the physically settled value will be charged. For all netted-off positions(spread contracts, iron condor, etc), the brokerage will be charged at 0.1% of the physically settled value.
- As clarified by the exchange based on the direction of the Hon’ble Bombay High Court, all physically settled contracts(both Futures and Option) will carry an STT levy of 0.1%(applicable for equity delivery trades) of the contract value for both the buyer and the seller of the contract.
- Interest will be charged at 0.05% per day if your account results in a debit balance when the additional margins are applicable(two days before the expiry day)
- You are required to bring in funds if your account results in a debit balance after physical delivery failing which the delivered shares will be liquidated to make good of the debit balance. Interest will be charged at 0.05% per day on the debit balance in the account.
Additional Notes
- All give delivery positions will require you to have the shares equal to the lot size in your demat account during the expiry week failing which it will end up in short delivery. Read the consequences of short delivery here.
- Stocks received by means of physical settlement can only be sold after receiving delivery of stock in the demat account (2 working days after expiry). In case of a short delivery, the credit of shares will take up to 4 working days after expiry.
- If you have 2 open positions on expiry that result in a net-off(Long futures and short call options, short put, and short future, etc) you are not required to give or take delivery for the position. However, there will be STT charged on the long position(s) as this is treated as notional delivery.
- Fresh long option positions will not be allowed on Wednesday and Thursday of the expiry week. Fresh positions will be allowed for futures and options writing contracts throughout the month. The allowed product types are NRML and MIS.
- You need to have a Zerodha demat account linked to your trading to trade in compulsory delivery contracts. This is to ensure that the stocks are credited in your demat account in the event of physical delivery.
- The increased margin requirement mentioned above is applicable on Wednesday(Expiry -1 day) and Thursday(Expiry day). If the contract expiry is changed to a different day, the same will be applicable from one day before the expiry day.
- In the event that you do not fulfill these margin obligations on time, your positions are liable to be squared off. Any loss arising out of such square off would be the sole responsibility of the client. For any reason which our RMS team is not able to square-off a margin shortfall position(s) and leads to compulsory physical delivery, the costs and risks of physical delivery will be applicable to the client.
- Contracts settled through physical settlement are illiquid closer to expiry. Any losses arising out of liquidation of position(s) with margin shortfall by our RMS team have to be borne by the client. It is advisable for a client to square-off such positions on their own or add funds to carry the position(s) to expiry.
- This policy may be changed at the discretion of the RMS team.
You can read these NSE FAQ documents – 1 & 2.
With all this in consideration, it is advisable for a client to square off all positions on your own before expiry.
If I Sold PUT of any stock and on the date of expiry it becomes ITM and I want to take delivery of that stock… then what will be the procedure for the same.. If system will do automatically or I have to do something ? please clarify with any example…
Hi Suyog, to take delivery of the underlying stock you just need to have entire contract value worth of full cash post-expiry. If you do not have sufficient funds in the trading account it will lead to the account going to debit. An interest of 0.05% is charged on the debit balance. We’ve explained this in detail here.
When I closed (Exited) my Short position (Future Dec ), I immediately received a Margin Call. The Short Position was closed in Profit, so why do my Funds go in Negative?
Sir , I have FUT of Aug series of CANFIN – LOT size 975 and buying at 857 . After expiry what is procedure of physical settlement
Hi Shantanu, you don’t have to do anything for the contract to get physically settled. This will be taken care of automatically if you haven’t squared-off the position.
Depending on your position (either long or short), the shares will be credited to your demat account (for long position) or debited from your account (for short position).
You just have to ensure there are sufficient funds to take delivery and sufficient shares in your account to deliver, esle it’ll lead to short delivery. You can learn more about short delivery here.
Because anyway in case of deep ITM situations, unless a major crash or gap up happens, the chances of expiring deep ITM is less, as margins starts to increase from Friday of the 3rd week, which if failed to keep will be auto squared off by RMS within 1 day. So this leaves the CTM contracts where the risks are higher as chances of expiring ITM in the last minute is higher. So according to that article if margin is not sufficient, it says contract wont get exercised. Please kindly clarify.
Thanks Shruthi. But I asked this question because I came across this article.(Link Below)
https://support.zerodha.com/category/trading-and-markets/margins/margin-leverage-and-product-and-order-types/articles/policy-on-physical-settlement
In this under the section, ‘Policy regarding Close to Money contracts (CTM)’, it says that the option wont get exercised and the contract will become worthless if the margin balance is below 50% of Contract value + profit. Am I understanding this right or am I missing something? It would be helpful if you could answer this.
Hi Sathish, this is right. If the option is CTM, the exchanges have provided a do not exercise facility, we will be using this option on expiry day in case the cash balance and the intrinsic value of the option contract is less than 50% of the contract value. However, if the option is not CTM, then it will be physically settled and you will have to give/take delivery of underlying shares.
Thanks. So the only way to avoid physical delivery is to square off the positions before the Friday of 3rd week on a given month. In that way it is safer right?
If you do not wish to give or take delivery of underlying shares, you can square-off the position anytime before the markets close on expiry day.
In ‘Buy/Sell price of the physically settled stocks’ Section, it says ITM expires at zero value. But ITM has some intrinsic value right? Is this the case with stock options only? If you could answer my query, it would be helpful. Thanks.
Hi Sathish, stock options expire ITM but at 0 value because the delivery of shares is done at the strike price. This is applicable only for stock options as they are physically settled.
Index options are cash-settled, so the ITM options will be settled at intrinsic value.
Thank You for clarifying. Also if by any chance the OTM stock option position changes into ITM at the last minute of expiry, and if my funds are less than 50% of contract value, then the options wont be exercised and contracts will expire worthless. My margins will be released back. Is my understanding in this situation right or will I incur any other charges like margin penalty?
Hi Sathish, if you hold a long call or put option and if the OTM position turns ITM, the delivery margin is applicable. Holding positions without the exchange stipulated physical delivery margin (including long options) can lead to margin penalties. You can check more details on this here.
Also, if you do not have sufficient funds to take delivery of underlying shares, your account will result in a negative balance on which interest is applicable at 0.05% per day. In case, the obligation is to deliver shares and if you do not have shares in your holdings, this will result in short delivery and auction penalty which can be up to 20%. You can learn more about short delivery here.
Hello Zerodha,
just like how your varsity page has simple examples that explain various topics it would be TREMEMDOUSLY helpful if you could also put-up examples to show
1)what happens when the users account does not have sufficient funds when he/she is obligated to accept physical delivery from a short put position. Example: A sold a put a option with strike price of 100 on infosys and on expiry date the stock was 80, but A does not have available cash in his account, what happens then?
Hi Jarus, we’ve explained this in detail here.
Let’s say if I have a short position in 700 PE in share A along with a short portion in future. During expiry when the share price closes at 750 what obligation would I have with respect to future position?
I am planning on buying 1 lot of Vedanta shares in the cash segment and securing them by selling 1 lot of futures. Do I need to put up margin. Can zerodha block these share as part of settlement/ or atleast till i do not square off my position.This would save a considerable amount of margin
Hey Paritosh, yes, you will need margins for shorting the futures contract. You can however pledge the shares you buy and use the margin received for shorting futures. You can learn more on pledging here.
Thanks for clarifying.
If I were to pledge the share would Zerodha have the right to transfer the shares from my account for the duration of the pledge or will the shares still remain in my deemat account.
Hey Paritosh, the pledged shares remain in your demat account itself. You can check out more details here. However, if you wish to give physical delivery of shares upon expiry then you will have to unpledge the shares before expiry day.
Now post the latest circular of NSE that re introduces DNE in stock options, what is zerodhA policy ?
I want to know how can I make sure that my options are necesarrily physically settled if they become ITM ?
2. Why is nudge still showing ‘compulsory physical settlement ‘ । Then what does re introduction of do not exercise by NSE for stock options mean ?
I forgot to mention i write options . I currently have written Reliance 2660 ce for may . I have the shares to deliver. What can I do or if I can even do anything to make sure that my position gets physically settled if it becomes itm
Hey Kanishka, the DNE facility is available only for Close To Money option contracts. We will be using this option on expiry day in case the cash balance and the intrinsic value of the option contract is less than 50% of the contract value. Explained here.
Ok got it । One final question। Since i am the writer of the option and the buyer chooses not to exercise his option, i get to keep the entire premium ?
Hey Kanishka, yes, as an option seller you will get to keep the premium if the buyer chooses not to exercise the option.
I had purchased a TechM 1560 CE on 24th March (Thursday). Today I got a mail that I have a long open ITM options position in a contract with compulsory physical delivery, Till when (which date) can I exit this trade ..?
Hey Varun, you can exit the position anytime before market closes on expiry day. After that if the option is ITM, you’ll have to take delivery of underlying shares. You can check out more details here.
I had both short put and short call deep ITP positions in some F&O stocks on expiry date. I received a note from Zerodha that the positions have been netted off. Which what I expected. However, I don’t see the losses accumulated debited to my account on Friday. Even the tradebook does not show the netted off entries. Does it take time for Zerodha to post the losses to my account. If so, when will I see fully settled updates to my fund ? What I currently see is only the profits and losses I booked during manual adjusting, but the net-off entries are not reflecting. Could you please share how and when this will happen ?
Hey, please create a ticket at support.zerodha.com. Our team will have this checked and assist.
Idfc Jan 70 CE ka 50000 share liya tha idea nai hone se mai isse sell nai kar saka Thursday ko kya karna hoga jisse mujhe koi fine na lage physical settlement mai . Pls help . Mujhe jada idea nai tha iske regarding
Hello Team,
I bought 1 lot of “tatapower 215 PE” on Jan 24th. Currently tatapower is at 229.55 which means my option is still OTM.
1. Assuming this becomes ITM tomorrow or on 27th, can I hold this option till expiry day (jan 27th) and exit the position myself before 3pm without maintaining required margin in my account?
2. If this option is OTM, should I still maintain required margin tomorrow?
3. As soon as tatapower spot price falls to 215 or lower either tomorrow or on expiry day, will my position get auto squared off immediately or can I exit myself to book the profit?
4. Can I buy OTM call or put options on expiry day or 2 days before expiry without maintaining required margin?
Hey Kiran, the margin requirement for your Put Option will increase as it becomes ITM as exchange blocks physical delivery margins from expiry minus 4 days. There is no additional margin requirement if the position is OTM.
It’ll not be auto squared-off immediately and you can exit the position whenever you want to before market close in expiry day. However, if you’re not maintaining sufficient margins, your position will be squared-off at the discretion of RMS.
You won’t be able to take fresh long positions in Stock Options on last two days of expiry. You can learn more about physical settlement here.
Okay. Thanks a lot.
When you say margin, I hope you don’t mean only cash margin. I am carrying ITC ITM put and I do have sufficient margin in terms of liquid funds and stocks (50:50 ratio).
Is this enough or do I need to maintain cash equivalent to the settlement value on the expiry day?
Need your advice, thanks.
Hello,
I received email stating “Long ITM options positions in contracts with compulsory physical delivery”. I have made an Iron Condor for Wipro for 27-Jan expiry. Here are the trades in this –
Buy – 630 PE
Sell – 650 CE
Sell – 660 PE
Buy – 680 CE
Presently Wipro is at around 607. Hence, both the Put options are ITM and the Call options are OTM.
Since I have an equal amount of ITM Put options – bought and sold, hence, I need not worry about physical delivery of shares at the expiry. Is this understanding correct?
Also, can you please let me know that for this strategy, how can I know the increased margin requirements for the last 2 days of trade.
Thanks,
Mohit Saini
Hey Mohit, as your both PUT Options are ITM, if things remain the same on expiry, your physical settlement obligation will be netted-off. For Long ITM Options, the exchange blocks physical delivery margins from expiry minus 4 days, which increases in a phased manner as the expiry day nears. For the short option position, the margin requirement increases on the day of expiry to 40% of the contract value of SPAN + Exposure margin, whichever is higher. You can check out more details on this here.
For further queries, would suggest you create a ticket at support.zerodha.com. Our team will assist you with this.
Hello
I have 150 shares of tcs, which I have pledged for margin. Now suppose I short tcs call option which expires in the money. Would Zerodha use those pledged shares for delivery or Zerodha will buy new shares from auction for delivery of those shares
Hey Sanika, you will have to unpledge the pledged shares before the expiry date for physical settlement.
How much time does it takes to unpledge shares. If Thursday is expiry so can I initiate unpledge process on Thursday itself or I can do it on Friday as well
Sanika, if you place an unpledge request before the cutoff time (3:30 PM) the shares will be available for trading the next day onwards. Best to place the pledge request on Tuesday or Wednesday so shares will be available for trading on Thursday. More on unpledging here.
Hi
i bought IRCTC 840 PE average rate Rs @ 8.50 and closed on expiry day for Rs.11+ on December 30th expiry …. but i did not sell the 1 lot of PE (qty 1675) what will be the settlement ? is zerotha will do true buy rate and sell rate of physical settlement (they pool rate current market price) or false buying settlement from zerotha
Hey Velu, as IRCTC closed at 833 on expiry day. Your 840 PE will expire ITM and as Stock F&O are physically settled, you will have to give delivery of underlying shares. If you do not hold sufficient underlying shares to deliver, this will result in short delivery. You can learn more on short delivery here. You can learn more on physical settlement here.
If you have further queries, you can reach out to us by creating a ticket on our Support Portal.
Hi, for e.g.,if we buy 160 call option of share XXX and hold till expiry and take physical delivery and if market price of the share XXX is 200 during expiry, whether we gain rs 40 per share in delivery mode?
Hey Sudipta, the shares will be delivered to you at the strike price of the option, so this will be your buy average for the shares. The difference between your buy price and CMP will be your P&L.
If we have sold a put and paid 1.5 lakh as margin. Now if put option is
comes in the money , and am ready to take delivery on expiry.
Suppose the value of share lot (contract value ) is 5.5 lakhs, and we pay
only 4 lakhs ( keeping in view that margin of 1.5 has
already been paid). Can we do this ?
or we have to compulsoryly pay/keep flot balance 5.5 lakhs over and above margin ( i.e 1.5 lakhs +5.5 lakhs = total 7 lakhs ).
Hey Akshay, you can keep the balance in your account by taking the margin blocked into consideration. However, do note that for taking delivery of shares, you will need cash in your account. The collateral margin received from pledging cannot be used for taking delivery of shares.
Everyone is talking about penalty, but what is the quantum / amount of penalty?
Hi,
If i short a 1 lot future (and already hold 1 lot short ITM Put as first leg), how does settlement work in this case?
Assume also that i have 1 lot stock in my demat account.
Hey Vimal, this will result in a net-off and there won’t be any delivery obligation.
I have query on Physical settlement of options :
Scenario : Stock – SBIN, Month – NOV 21 – I have following position on PE side : Buy 470PE – 3lots , Sell – 505PE – 3lots on CE Side – Sell 550 CE – 3 lots and buy – 590CE – 3 lots. What will happen if SBIN expires on 520 .
1. Do I need to take deliveries ? ( since this is Iron Candor ?)
2. Will i be keeping the Premium received at the beginning of taking positions of Options ?
3. What is my obligation to Zerodha on expiry in terms of any money to be given or taken while final settlement on expiry if i let the option positions expire till last date by exchange ( 25th Nov 21).
Clarity on this will be appreciated . Thank you
Same query for me. A clarification on this shall help.
continued..
unable to square off without incurring heavy losses due to illiquidity.
Please advise better approach in this case.. If I leave it to expire, the max loss could be 7K only.. in addition there could be charges for netoff… which I can manage as well as get a chance to try to square off at better price till expiry.
How much margin should I keep in order to avoid any automatic square off by Zerodha which will result in heavy loss..
Hi,
Need your help urgently. Can anyone please advise on the below
I have hedged positions (short (350 PE) and long (355 PE) – both deep ITM) in VEDL ( CMP 323).
I understand that I dont need to take delivery as it will ne a net-off (Kindly confirm).
How much margin should I keep in my zerodha account in coming week if I dont square off.
Note: There is a big spread between call and ask prices ( nearly 10 RS diff between call price and ask price) and unable to
Suppose I am a call option writer and the strike price is ITM on the day of expiry. I have the shares of underlying stock in my demat account. What happens to my margin money in such a case?
I was send account opening from two times. 1st time rejected for signature and 2nd time send account opening from but on action Zerodha teams.
Shreya Debnath
Kirnahar, Birbhum, West Bengal,
Pin – 731302
Please reply and open account. Thanks.
If I use a bull call spread, do I need to have the margin to receive the shares?
For instance, I buy 1 lot of M&M 850 CE and sell 1 lot of M&M 900 CE,
and if the spot price at expiry is 880, do I need to have the margin??
And what if the spot price is 920 at expiry, do I need the margin???
if i have long future and call sold for same expiry which is itm.So in this case i have to do anything or it will settle automatically.
If there are counter positions (ITM short put and ITM long put or ITM short call) then it results in a net off if left to expire on the exchange. Will the profit or loss from the net off be cash settled?
a) Say I have sold SBI SEP21 PE 440. On expiry day, SBI spot is trading at 300. This will result in physical settlement as the strike price is more than 3 strikes away. To avoid this physical settlement, can I buy SBI SEP21 PE 300 just before expiry day square-off time say at 3PM? Expectation is that, it will result in netting with MTM loss of 140 points without needing two opposite physical settlement.
b) Similar to (a) but with Futures. Say I have sold SBI SEP21 PE 440. On expiry day, SBI spot is trading at 300. This will result in physical settlement as the strike price is more than 3 strikes away. To avoid this physical settlement, can I buy SBI SEP21 FUT just before expiry day square-off time say at 3PM? Expectation is that, it will result in netting without needing two opposite physical settlement.
I sold put of M&M strike price 770, CMP is 775.. I had 550000/- rs. in my account lot size is 700.. I used 105000/- rs. as margin out of 550000/-… Now If this put would become ITM and its going to expire, margin used that day 150000/- out of 550000/-, cash balance would be 400000/-, 1 lot needs cash 550000/- around… should I have to arrange cash 150000/- or that would be settled from margin…please guide me
Hi,
I have shorted an inverted strangle on equity options, now both CE & PE are in ITM. if both are in ITM on expiry , will there be any physical delivery obligation? either case how much margin I need to maintain till expiry day. Please clarify .
my Positions:
Short PEL AUG 2700 CE
Short PEL AUG 2850 PE
now PEL is at 2767
All ITM contracts which aren’t CTM will be mandatorily exercised by the exchange. This means that anyone holding an ITM CE option contract, he will give delivery of stocks.
Pls help to answer below queries from covered call seller point of view :
1. What treatment if person forget to unpledge the complete lot on expiring day and pledged margin remain unutlized.. will shares auto un pledged and settled.
2. What treatment if person forget to unpledge the complete lot on expiring day and pledge margin utilised.
3. Will Call normally settled if unpledge the share on monthly expiring day
hello sir,
what will happen to stock options if not settled on expiry ? will it auto sqare ? i had sold 2100PE Reliance contract 29th july and not bought on expiry . Now My My margin exposure has been wiped off as of now on august 1
I have query, this policy applicable for all future expiry or only current month. For Ex. Next week July series going to expire, i have august future long and august put long. Margin will be nearly 80K roughly. By next week this will get increased?
No. The margin is increased only if you hold a contract for the expiry happening within 2 days.
I have 2 legs for SBI – 1 lot of deep ITM PE long of current month expiry and 1 lot of future long of next month expiry.
Please clarify if at current month expiry – the settlement will happen based on netting between these two legs and it will not involve any physical delivery ?
If your deep ITM long position in PE is beyond 3 strikes above ( meaning 4th strike and above) then you will have to compulsorily take delivery of the stocks in your demat account. You will need to maintain sufficient balance or you will be charged further fines or cost that would be associated with squaring of your position. So it all depends on how deep is the deep ITM. 🙂
i need your guidance and clarification.
1 i have 1 lot of SBI shares in my D mat account.with zerodha. for long term
2 I want to sell deep OTM CALL SBI. 1 lot.
3. Can my SBI holding in Dmat account be used as margin by lein or pledge. if yes . How? Procedure please.
4. If my position sold call position continues to be OTM till expiry , does it require additional margin. if Yes cant it be met out of pledged lot of shres automatically
5 if my sold position becomes OTM Does it need additional margin. if Yes cant it be met out of pledged lot of shres automatically. Procedure
6 Is it not prudent to square off the position by Tuesday of last week to avoid physical settlement.and related margin issues, additinal charges.
Pl donot feel bad, if i sound repetitive, as the querry is not from so expert.
Hi Faisal,
I have 2 legs for SBI – one lot of deep ITM PE long of current month expiry and one lot of future long of next month expiry.
Please clarify if at current month expiry – the settlement will happen based on netting between these two legs and no physical delivery will be required or not?
I own one lot of Federal Bank shares. I have shorted a far OTM call for the same. I am ready to deliver the shares if my traded option expires ITM. Why do I have to maintain so much margin, why can’t my margin be the complete lot of shares I already own? To avoid maintaining huge margins, I am ready to get them blocked for trade till expiry if required. Even pledging my shares is out of the question because i would have to unpledge them before a day atleast resulting in huge margin requirements on the last couple of days.
(1) I am going for Covered call options strategy.
(2) I do have required number of shares in my Dmat account
(3)My short call option goes ITM
Do I need to still maintain full contract amount in my trading account ?
In other words if still ‘expiry day 40% margin’ rule is still aplicable for me since I have ITM call option ?
Yes, you’ll still need margins.
Thanks…
Continuing on the above query of Jitendra
1) If i have pledged the holding shared of the sold CE .. Do i need to unpledge it for delivery in case short call goes in ITM ?
2) How much is the % of margin required for Short CE if it comes in ITM ?
3) Can i inform Zerodha in advance that I am Ok to give delivery from holding for ITM short call to avoid more margin calls?
I am facing the same issue. Inspite of having a backup of an entire lot of the shares, why do I still need to maintain such heavy margins to sell OTM calls. It’s technically a zero risk trade. Why margins?!
Pls some one to answer this question
1) If i have pledged the holding shared of the sold CE .. Do i need to unpledge it for delivery in case short call goes in ITM ?
Is it possible to open Zerodha account and invest in Indian stock market even if I am not Indian national and residing in UAE?
Thank you for the answer.
For in-the-money options, does NSE publish the percentage that was exercised / do-not-exercised after each expiry?
If yes, where is this data available?
one lot bharti may contract. couldnot exit. funds margin in minus . what will happen now. what do i need to do if i dont want to put more money towards the minus balance
I have Reliance Jun 2000 CE @ 76.50 – 1 Lot
It is June Contract than why i got mail from Zerodha like
We see that you have a long open ITM options position in a contract with compulsory physical delivery. All ITM options positions will attract a physical delivery margin of 45% of the applicable margin(VaR+ELM+Adhoc) prescribed by the exchange.
A shortfall in margin will lead to short margin penalty and possible squaring off of your positions. In case of a shortfall, you can add funds to your account or square off your position. Read our policy on compulsory physical delivery here.
If i have to do in this regards let me explain because i don’t know.
I have to sell or can hold till june expiry
Reply Fast Please
If ITM CE buy of Stock option was squared of on friday i.e 21-05-21 but expiry is on 27-05-21 , but the margin for physical delivery is already debited for the CE option on friday morning i.e 21-05-2021, will it be refunded?
If my view is bullish and I hold a CE and it gave me a Profit. Margin money in my demant account for holding the trade, in that case, be X. Then on the time of position square-off Karne I need to sell the option. So in that case Will the broker ask me to increase my margin money? Because in selling it asks for a greater margin, they ask for 1-2L if I want to sell any option.
why margin is increasing for OTM contracts and it is not explained anywhere.
I have bought 1 future lot (1851qty) Bharti airtel at 570 price . How much money needed for delivery settlement at expiry. I failed to provide complete margin , will broker will provide margin, against margin broker will charge interest? Am I right?
sir if i have CTM short call option and kept future long ,both position are open at expiry will they result in net off, or the CTM can net off future,which ITM can netoff. summary CTM can or cant netoff future?
Hi Sir, i have below query:
Suppose, I have pledged 7500 Nifty BeES with zerodha.
I sold one CE option of Nifty50 at 15000.
On expiry day, Nifty 50 closed at 16000.
How the cash settlement will happen?
1)Do I need to unpledge Nifty bees and then sell in open market?
2) or zerodha will sell it and do the cash settlement?
3) what is the time required for unpledging ?
If I buy Bank Nify 33300 . Call at Prize 250 , at end of expiry day it will close above Nifty 33300. And I forgot to sell my call option , what will I got. It will give different amount of nify or I have to take full loss. Please clarify me. Thank you
What you mean by sufficient fund
Does it means cash with you or it includes the present valuation of the shares in my account
How can I apply for physical shares for my options trade
What you mean by sufficient fund
Does it means cash with you or it includes the present valuation of the shares in my account
How can I apply for physical shares for my options trade
hi
If i have ITM CE plus ,OTM PE sell and Future Sell then this get expiry and position is netted off. so do NSE/Broker charge any Transaction Cost for the same. if yes what is the charges..
Zerodha is charging brokerage on delivery resulting from options assignment. This is unfair. Other brokers like Interactive Broker (I traded with them for several years) don’t charge it. Why I need to pay brokerage if I didn’t post any order. The process is of assignment is autoexecuted at exchange, so why Zerodha charging brokarage for the same?
Zerodha says – “Since there is a substantial increase in effort and risk to settle these F&O positions resulting in physical delivery, a brokerage of 0.25% of the physically settled value will be charged. For all netted-off positions(spread contracts, iron condor, etc), the brokerage will be charged at 0.1% of the physically settled value.”
This is not acceptable. Zerodha is not doing anything for these settlement, why should they charge brokerage?
Sachin
There is significant effort on our part, Sachin. Obviously when the exchange asks for settlement, this needs to be done by the broker.
Sir I am investing to much money in NFO ICICI I am losses all amount
I am poor person
I don’t know such types of trading
What if the pe thier no buyers what can be done in that scebario
I have tatapower feb expiry put option , which is now at lowest rate 0.05 , but shows no buyer how can I squared off this open position and if I am unable to exit because of no buyer what would be consequences and alternative to sought out this
I have bought Eicher motors Futures for Feb Expiry. I don’t want to book my losses. I want to take a delivery of the shares. Please let me know how much margin I should have in my account and how I can give instructions to zerodha that I want to take delivery and not willing to close my position.
What price I wil have delivery of the shares?
I have read settlement policy page multiple times. I have also followed many chats but could not find solid answers to the following questions. Can someone/Zerodha please clarify?
1. OTM –
Is 50% margin requirement applicable for already open positions i.e. OTM PUT or CALL on the last 2 days (Wed & Thus)? It is not clear from the statements whether it is applicable for only new positions or even open positions.
2. ITM –
2.1 PUT (Sold) – When should I bring in full 100% cash to collect the delivery? As at 3:30 PM market decides the final price of the stock, can I bring in cash immediately after 3:30 PM (i.e. after market closure) on the expiry ?
2.2 CALL (Sold) – If I have stocks already present in my account then do I still need to follow margin requirements in the last two days? if yes, then that is unnecessary additional funds blocked when I already have stocks (size of the lot) in my account.
Please help.
I am looking for the same answers. No clue why i have to maintain huge margins for selling calls backed by a complete lot of shares. I am ready to deliver as well. Why the margins
I have 3000(equal to lot size) SBI shares in my demat.
SBIN CMP : 280
I sold 280 (strike) CE @ 20 rs(premium) on start of the month.
at expiry, SBIN closes at : 305. and I am still holding the shorted CE till expiry.
1) Do I need to give physical shares delivery?
2) If yes, Do I need to specifically tell zerodha to debit 3000 shares from my demat? or it will happen automatically?
3) at what price, my 3000 shares from demat will be sold? CMP : 305(expiry day closing) ? OR strike price : 280 ? as I have shorted 280 CE option.
Hi Sanket, As per my understanding, there is no action on you. You should get a cash as per the strike price you choose and the premium which you already received. Buyer will get your stocks (as per lot size) at CMP which will be his/her gain above strike price.
Sir,
What if I have OTM Call or PUT option and it expires at 0 ? Do I need any physical delivery or any penalty or liabilities ?
Sir,
Correction*
What if I have short position in OTM Call or OTM PUT option and it expires at 0 ?
1.Do I need any physical delivery or any penalty or liabilities ?
2. What if it does not get squared-off due to liquidity issues?
OTM contract sellers have no obligation to square off on expiry day. Enjoy the expiry and keep the premium with you .
I have a SELL PUT done for Reliance for 1 lot. On expiry day if in loss or ITM, i plan to close this by taking deliverables of the stock . How can i do it on Zerodha app?
I have 3 questions. Anyone with knowledge please reply.
1- In a Bull call spread , will there be delivery obligation of the long call option if the short call option strike is OTM? Say long call strike is 1960ce…short call strike is 2060ce and spot price at expiry is 2000? Won’t it net-off if my one call is ITM and other is OTM?
2- What is the margin requirement if one Call is ITM and other is OTM?
3 – Will my margin requirement still double if my both the calls are OTM on Wednesday or Thursday?
4 – Will my margin requirement still double if my both the calls are ITM on Wednesday or Thursday?
1. No, the ITM call long will be exposed to a take delivery obligation and the short call will expire worthless(no settlement). Hence, this wont be netted off.
2. The increased margin requirement will be separate for both the contracts. Only SPAN benefit will be on a portfolio level. All short options will have margin requirement of twice the SPAN +Exposure(NRML) margin. For the long option, 50% of the contract value will be blocked only if it is ITM.
3. Increased margin will only be charged for the short options contracts. No additional margin for the OTM long contract.
4. Increased margins will be charged for both the positions.
Can you provide one example of loss gain calculation with physical settlement as below
Lot size = 5000 , Nooflots = 1, StrikePrice =85 , closing Price =83 , Premium per lot = 7500
Condition :- Put short
Question :- Whether client has to take physical delivery and what will be the purchase price/ share
Your stock buy price will be Rs 85(Strike price of the contract). Your options contract will be settled at 0(you keep the shorting premium).
So your net buy price will be 85-1.5=83.5.
Close my account permanently
Dear team
Why required margin . When I have trade in option . I have purchase all the stock with full paid .
If loss is done than all money is gone . If grow than no issue . Than where is problem to maintain margins . I have not trade in future .
Please reply the same
Mithun, while you only lose the premium when your option expires worthless, if the position expires in the money, you will need to take or give delivery of the underlying(the whole contract value) and the additional margin is required to fund the same.
Sir, I am buy a put of dabur,itc,lt,and mannapuram I do not have money in to settle exactly I am new to trade this option I do not have idea and I by put optionlile equity ..I have only 50000 in account what happened….I don’t know please help me…
What if you have shorted future and it expired itm and you don’t have stocks to sell?
Helo,
If I had entered into 2 legs.
Say Nifty 14000 CE Sell & Nifty 14200 CE buy. Here say margin is around Rs 50000/- being a hedged trade.
On expiry day, by afternoon, say if premium is more than that was in the morning. Can I exit my Buy 14200 CE position alone ? Will there be any margin issue and whether the Sell 14000 CE position also will get squared off ?
Sir Im new trader.i purchased ITC DEC 212.5 CE at a premium of 5.10, and it was squared off same day by zerodha team.. as far as i know we can keep options call till last thursday of the month..please explain?
I took Itc 215 ce @ 30 paisa, now its Otm, do I have to take delivery, or I can square off on Wednesday or Thursday
Hello ,
I have an active trade in Futures for HUL. The expiry date is 26.11.2020 for Nov month. Shall I exit the trade on before the expiry day or it is okay to exit it on expire day itself i.e 26.11.2020. Please help
I am having 3 Call options of Hindustan Petroleum @strike price of Rs.230 and the current rate is Rs.214/- and also one more call option @strike price of Rs.220/- and I did not square off the total 4 open positions which is of Nov 2020 contract. What will happen after the expiry day ? Kindly explain.
I pledged shares equal to lot size of tata motors and I short call option and now it is ITM. Will it consider that I have shares for physical delivery in my demat account? Or I have to unpledge it for physical settlement..this is confusing for me because shares are not showing in my demat account it is already pledged with the exchange..so will it take care of the physical settlement???
What if pledged shares equal to lot size and I short call option and now it is ITM. Will it consider that I have shares for physical delivery in my demat account? Or I have unpledge it for physical settlement..this is confusing fot me because shares are not showing in my demat account it is already pledged with the exchange..so will it take of the physical settlement???
Hey Jigar, you’ll need to have the shares unpledged. Pledged shares can’t be delivered.
Hi , If on Tuesday I am holding OTM option and on start of Wednesday it is still OTM and I convert it into MIS , and during the day it turn ITM ( but it is MIS now ) , in this scenario also there will be extra margin required ?
In case … There were no buyer for exit position…then what will happen
I have short a call option which requires physical delivery. I have equal no of shares in my account. How will it get settle on expiry ? Do I need to pledge the share for the expiry or will it be automatically get deducted from my account?
In a Bull call spread , will there be delivery obligation of the long call option if the short call option strike is OTM? Say long call strike is 400ce…short call strike is 450ce and spot price at expiry is 430?
When will I be able to see the physically delivered shares in my DeMat account?
No response for any call… Or token raise…. I have lost 15000 due to zerodha app.. I have placed my SL for stock it got executed @current price for three times
T+1DAY SETTLEMENT IS ANOTHER ISSUE@ZERODHA
TODAY I HAVE A ISSUE TO PLACE MY STOCK OPTION…. IT SHOES 10* OF IT’S PREMIEUM PRICE.
Hi,
For the ITM options, if I dont have enough margin for 2x, can I pledge other stocks to prevent from auto square off on Wednesday and move it until Thursday morning?
Hi,
I have bear put spread of Kotak Bank (1580 PE buy & 1540 PE sell). If 1580 PE become ITM tomorrow, will Zerodha still block 50% margin?
Dear sir,
Please clarify me on this situation.
I have a long futures in a stock and sell ATM call and put option of the same stock.
On the day of expiry i exit the future position but have to hold on for the call and put due to illiquidity. What if i have these positions open after the market close.
Will the positions get netted? Or do i have to take delivery of any lot because 1 option will be in the money while one will be out of the money. Please clarify.
Dear Nithin,
I need urgent guidance from you for the following scenarios :
Scenario 1)
Lets suppose that today is monthly expiry of September. I have a short call position in Wipro for example which is deep ITM and it is not liquid and I cannot square it off. I am not holding any stocks of Wipro with me. To avoid assignment risk, what are my different options ? Do i take a counter position so that there is no assignment ? Can i open a fresh long futures position in Wipro in September contract for just the last day and let both positions expire on their own ? What can be other alternatives so that I avoid getting assigned ?
Scenario 2)
Lets suppose that today is monthly expiry of September. I have a short put position in Wipro for example which is deep ITM and it is not liquid and i cannot square it off. I do not have enough cash to take delivery of stock. To avoid assignment risk, what are my different options ? Do i take a counter position so that there is no assignment ? Can i open a fresh short futures position in Wipro in September contract for just the last day and let both positions expire on their own? What can be other alternatives so that I avoid getting assigned ?
Your guidance is urgently required. Pls help.
What’s the logic of asking for 2x margin on short deep out of money options? Looks like Nithin has zero understanding of how derivatives work! The circular doesn’t ask for any such margin requirements.
There is no way to know id the OTM option will remain OTM, hence the margin requirement.
Hi sir,
I have entered banknifty debit spread with 100 lot size with the debit of 6.5 rupees. While closing the spread I have closed the buy call first and immediately I closed the sold call as well. But I got a msg that u have exceeded the margin requirement more than 200%. So kindly maintain the margin. But there is no positions at all. I have closed immediately. I am confused. Please clarify.
Hey Sateesh, this alert is triggered as soon as you exit the buy leg. If you close the sell leg immediately after, there is nothing to worry about.
Hi
I short a PE of coal India 130 strike now it’s ITM so I need to take delivery of shares , I have a query about margin
Total margin I need is 480000
Blocked margin – 300000
So if I take delivery than how much separate amount I need
Hi, I have ongc 82.5 CE September 24 expiry .. CMP ongc stock is 68 or so.. can someone please tell me if this option needs physical settlement?
I purchased Coalindia sept 145CE current price is 119. How to exit this position on Wednesday? Will it auto sqaure off what are the charges!
I hv ongc ce bought@ 1.65
Now itz @ 0.5 .im in loss
I received mail regarding physical delivery ..i could not understand this..plz help
Sir one more query. If I hold equal number of shares in my demat account for which I have sold call option, will I required to give margin for option sell contract or will it be marked to my demat account. Regards
Sir, if I have equal number of shares in my demat account and had sold call options, will there be additional charges on expiry if I don’t square off my call option contract.
Sir I can’t buy OTM options for stocks on day before expiry and expiry day.why?
For bull call spread buy reliance call 2300 and sell call 2400 what is margin requirement from friday onwards 4 days before expiry on the sold call…Will the margins increase or i will continue to get margin benefit as before?
Please clarify following on Margins I need to hold – I want to by Reliance OCT Futures today (Sep 15 ) and at the same time hedge it with buying Sep 2200 PE (Options Buy) – 1 LOT For both –
As of now Basket order shows Final Margin around 1 lakh 10 Thousand –
Since from Friday that is considering Sep 24 as settlement Kindly let me know the Max Margin I need to keep – so that I can take decision –
Give amount in both cases –
Full Cash and Collateral Equity
Does taking 2200 PE Buy – helps in reducing Margin required in last two days of Settlement
Kindly clarify
please also inform that can we take short positions on Wednesday and Thursday of expiry week when you have restriction to make long positions to take long positions on Wednesday and Thursday of expiry week.
Thanks
As the post above says, you can take a position if you have enough margins/stocks.
Just joined Zerodha, New to this market and I have following covered 3 legged set up -Long ITM Call, Long ITM Put
Short ITM Call, zirodha has mentioned that this set up is netted off from delivery obligation. I would like to know if I leave this three leg set up to expire on its own, would I require to deposit 50% of lot value of share for two legs or all three legs? Thanking you
Please also mention the expiration rules for Nifty and bank nifty.
This only applies to physically settled contracts, which Nifty and Bank Nifty are not.
Sir if Iam holding 550 shares of hdfc bank and i have a short position of call option, do i need to maintain extra margin during the last two day of expiry .
I forgot to square off my short future position on expiry. Now some amount is blocked from my account. In how many days this will get settled and what will be the calculations and charges???
Dear Team,
Due to compulsory delivery, you are not allowing fresh buys on Wednesday and Thursday of expiry week. Can you atleast allow buying option with MIS order so that it anyway needs to be sold before market close. Don’t allow to convert it to NRML. It will help since lot of option strategies can be worked at the last days when premium price is less. I hope you will consider this.
Thanks.
Hey Anurag, the problem here is that even we may not be able to square off the position if there isn’t enough liquidity, hence the restriction on MIS positions as well.
Dear sir
can u post link for “options settlement -MIS orders”?
Example:
today 13 oct i have buy ” tatamotors 130PE -MIS order” expiry 29 oct 2020 and unable to square off (couldn’t exit due to less liquidity or no buyers of Put option). plz explain how it is settled.
thank you.
Hi,
I have the following in my account:
1000 (2 Lots) Indigo Aug 1200CE sold @53
2000 (4 Lots) Indigo Aug 1200PE sold @ 36
500 (1 Lot) Indigo Aug Fut sold @ 1200
Please suggest on the following:
1. What would be my profit/loss if I do not square my positions & let all of them expire ( lets say the Indigo closes at 1190 on expiry)?
2. What would be the margin requirement to let it expire?
3. What would be the quantity of Stock that I would receive ?
In case of Long positions in Options, There will be a physical delivery margin charged for all In-the-money(ITM) long options.
My question is for eg ONGC is trading at 82 today in Aug series and today is Friday and next Thursday is expiry i.e 27th aug.
If I am holding 80CE since past two weeks, when will I have to pay margin on this, will it be applicable from today i.e Friday EOD or it will apply two days before expiry i.e next Wed Thurs? Its too confusing neither zerodha is explaining properly nor any other broker.
As per NSE margin starts four days before expiry while here it is written only two days before expiry…!!
Please help guys…..really need this clarity urgently.
What if I have long call and long put both of which on expiry becomes ITM, am I obligated to take the delivery of shares and sell them subsequently both of which would result in huge capital pledging?
For eg if for X share I have long call for 10rs and long put for 20rs, on expiry the share is trading at 15rs, is it my obligation to buy for 10rs and sell for 15rs, for which I will be ending paying very high margins but eventually make profit?
Plz guide if i am having a Credit Put Bull Spread 1:1 and both the PUT Options are the OTM, then does my margin for the spread remains normal or it will increase 2 times on Wedesday and Thursday.
Thanks in advance.
Dhaval
Hi,
I need to understand in simple words, what is the daily carry charges for future if we use margin facility ?
What is the daily carry charges for future if we have “lot* value ” capital in the account ?
This will help me great to plan futures trading.
Narayan, you require to maintain SPAN +Exposure margin charged by the exchange to carry a futures position.
If you are new to derivatives, suggest you start with reading Varsity(Module 4 and 5)
hello sir, is margin reqirement on short call ( with additional margin on last 2 days before expiry ) applicable, if i am holding shares in my demat account equal to lot size.
Harish,
Yes, the increased margin requirement will be applicable even if you have a covered call. This is because the cash and F&O segment are treated separately by the exchange and the broker carries a risk of short delivery if you end up selling the shares in the cash market.
Sir, I bought EQUITAS JUL 64 CE and lot size is 7600 with @3 Rs premium price. And I have no experience of option but I am on loss now but as I read out the articles. Could you guide me to minimise the losses and I does not want to buy the stocks so what should I do now ? Please guide sir
I have acc 1400 ce 500 lot expiring on 30/08/202 bought @29. Today my balance shows -17252/-
Q1. Can i close my position tomorrow without adding the balance ?
Q2 whats the deadline for depositing this amount in order to avoid auto square off.
Q3 if fail to deposit and this position is automatically squared off. Will i get the remaining amount at which system has squared off my position?
Q4 if i deposit this 17k can i close the position at market rate ?
I have also same doubts (regarding reliance), please help us in that.
-thanks
1. Yes, you can square-off without adding margins.
2. Best to deposit at the earliest. Square-off depends on your entire portfolio.
3. Yes.
4. Yes.
I have few positions in options both long and short…few positions are spreads…above, i see no double margin requirement on Wednesday of expiry week
What about other positions all of which are OTM? I got an SMS saying to increase the margin to avoid automatic squaring off!!! Isnt it applicable only to ITM positions?
There is no way to know which positions will go ITM on expiry, so we message everyone.
Do you just message everyone or even apply double margin rule to everyone, even OTM options?
As explained in the above post, margins are also increased for everyone for the same reason.
hello, if i am holding 3000 shares of SBIN in demat account and having short position on SBIN 200 CE. if sbi closes @208 on expiry day, what will be charges for my demat SBIN selling and how my SBIN 200CE willl be settled if i don’t cover my 200 CE short position due to big spread diference. please assume that i am fulfilling all margin requiirements. thanks
Hey Sandeep, DP charges and 0.1% brokerage will be applicable on the contract value.
hello sir, as from your reply its clear that in case of short call, demat holding will be debited at strike price.but what about short call position, which is not squared off and is trading at some value.
If I have a market lot of an F&O stock in my demat account, and I am willing to have that holding ‘blocked’ or ‘earmarked’ against my sell transaction of a Call Option on that stock, am I still required to put up a cash margin for the Sell Call transaction? if yes, what is the earthly logical reason for such a margin requirement?
I have this exact same question. Can someone from Zerodha support answer this please?
Hi newbie here,
I have sold TCS put PE @2000 at the strike price of 5 rs
So I got the premium of 300X5 = 1500
I want to know how ITM put settled expiry day .
If TCS comes below 2000 then will it asked me how to settle?
1) if money is there in my zerodha account ie 300X2000= 6L then delivery will be executed automatically or do I need to provide instructions?
2) Whether it will be squared off if money is not there
Please clarify, I want delivery of shares in my demat account , by how much time the required margin should be there in my account?
If you have sold put options, on expiry it will result in taking delivery. Hence having money in your account is sufficient.
Cons of this approach –
1) This will result in 0.25% brokerage + STT + stamp duty + DP Charges etc. etc.
2) It takes T+2 days for shares to hit your DP account and prices might fluctuate in the mean time
Alternative Approach –
1) Maintain required margin and square it off before expiry
Or 2) Buy ITM Call Option, two days before expiry
Or 3) Sell ITM Put Option, two days before expiry
According to me alternative approaches are better than holding cash because of three reasons –
i) the price is locked
ii) you will only pay 0.1% (20/- in case 1) compared to 0.25%
iii) you will not pay DP and other charges related to physical delivery
The only con of following 2 & 3 is that – if price moves in your favor on Wed or Thrus, you will not benefit from it. Plus in case of 2 & 3 you will end up paying 0.1% brokerage and STT on settlement. So follow method 1 if you think your contracts can have enough liquidity on the day of expiry, if not 2 & 3 are the next best options
Sorry… You wanted delivery of shares in your demat account.
1) No action is required from your end – need not give any instructions
2) Put Option will expire on Thursday and shares will hit your demat account on Monday.
Amount will be debited on Thursday itself.
We understand that the margin requirement increases to 2x of SPAN + Exposure on Expiry minus 2 days.
Does this include the margin benefit for taking a covered position? Say margin on a naked Kotak CE sold is Rs 1.5 lakhs and it would increase to Rs 3 lakhs on Expiry – 2 days. Similarly in a covered position, Kotak CE short (1300) and CE long (1340), the margin (including cover benefit) is Rs 35k and it would increase to Rs 70k. Is this understanding right or would it be:
50% of notional contract for the long position (50% * 400 * 1340) + 2x of normal margin (SPAN + Exposure) which is (2 x 1.5 lakhs) 3 lakhs on short position. This would aggregate to Rs 5.6 lakhs.
Are you able to share an illustration of margin requirement at end of day, each on Tuesday and Wednesday of expiry week.
Hi Matti,
I have below questions:
1) As per your statement “Fresh long option positions will not be allowed on Wednesday and Thursday of the expiry week.”
It means, if I pay full premium amount (NRML order), even then I will not be able to open fresh long option positions on Wednesday and Thursday of the expiry week ? Please confirm.
2) Suppose, I have already a long position either in call or put. Now on Wednesday or Thursday of the expiry week, I want to exit from this position before it expire.
Will I be able to exit that long position on Wednesday or Thursday of the expiry week ? Because, if no-one can buy option on Wednesday or Thursday then who will purchase my position ? How I will exit from my long position ?
1. Yes, no new positions are allowed. Also, you always pay full premium for long option positions, be it NRML or MIS.
2. You can exit, yes. There are other people who would have shorts who would want to exit too, right?
Thanks a lot Matti. I got your both points.
Having one more question.
On Wednesday and Thursday of the expiry week also we can see that OI gets increases in Stock options. OI increases only when new contracts are being created. If “no new positions are allowed” on these 2 days, then how OI gets increases ? In few stocks I have seen that OI increase happens in Lakhs on these 2 days.
I sold option of Banknifty which is expiring in OTM. Do I require to buy same number of lot before expiry to square off? Or it will be ok if I don’t square off my position as it is expiring in OTM.
Do I will be charged for not squaring off my position?
There will be no charge to let the trade expire.
“Policy regarding Close to Money contracts (CTM)”
For long call, the lack of fund balance is used to decide “Do Not Exercise” for CTM strike. But what is the criteria for long put? Is it based on if the client has lack of shares?
In the trading platform, can there be a feature for the option buyer to request “Do No Exercise”? Instead of deciding based on the available fund (or share holding)? Because, sometimes, one may have enough balance in the account (or shares in the account), but the wants to request “Do Not Exercise” for CTM strike?
“
Can anyone tell what about the option expiry of indexes?
Does it needs to be cash settled as well?
Dear sir,
I have done exit my long position before 3 pm… But it not executed, it placed in open position, help me for exit my position.
Hi,
I have below questions:
1) As per your statement “Fresh long option positions will not be allowed on Wednesday and Thursday of the expiry week.”
It means, if I pay full premium amount (NRML order), even then I will not be able to open fresh long option positions on Wednesday and Thursday of the expiry week ? Please confirm.
2) Suppose, I have already a long position either in call or put. Now on Wednesday or Thursday of the expiry week, I want to exit from this position before it expire.
Will I be able to exit that long position on Wednesday or Thursday of the expiry week ? Because, if no-one can buy option on Wednesday or Thursday then who will purchase my position ? How I will exit from my long position ?
If am long an Option, will my position will be cut down today if my account do not have sufficient Margin.
Or it will cut down tomorrow.
I Have 1 one lot of REC ltd of 80pe BUY & forget to close. Does it come to physical delivery? That which I have to any charges? Please help me it is urgent.
Hi Team,
I understand the need of increasing margin if they are ITM or close to it, citing the risk of physical delivery.
However, why is the margin doubled for short options even when they are far off from ITM and fall in OTM. They don’t have any risk of physical delivery.
For example, ApolloHosp 25-Jun PE written at 1260. The stock price on 24th is at 1400. So this short put option is far off and no risk at all. Even then why are the margins getting doubled??
Hi Sir,
I have one call opction, I am in loss, Can I hold till Thursday expiry at 2.00 P.M.?
Please reply.
Yes, you can.
Hi Can In shell My Open Postion on Wednesday and Thursday on month Expire , Is thir any cost involved in this
Yes, you can.
You didn’t reply for any cost involved or not. Hope there will be heavy hidden charges detected by zerodha broker.
Hi, I have ongc 82.5 CE September 24 expiry .. CMP ongc stock is 68 or so.. can someone please tell me if this option needs physical settlement?
Commodity Options ka kya hua sir
They are available for trading on Kite.
what will be the margin requirement if i have this position as on wednesday before 1 day of expiry close :
bpcl +375 call = 1800 shares
bpcl – 390 call = 3600 shares
bpcl +400 call = 1800 shares
if the shares closed on wednesdays as follows :
380
390
395
400
405
I will be squaring off the position on the day of expiry around 2 pm .
Thanks.
Hi, I am holding M&M option 450 PE today Friday June 19th. Next Thursday 25th June is expiry. Current M&M future contract trading at 500 rupees. My question is whether my PE is applicable for compulsory settlement? Can I hold it till expiry? Will it charge me anything if I don’t have anymore balance in my account?
If we have all the margin provided by pledge of liquid bees on expiry day how will fno settlement processed.
Hi my Cipla short futures expired on 28th May.
1) Where can i find out at what price my short was squared off / auctioned ? I am sure some report would capture it or do i need to email zerodha ?
2) When do i see a reversal of my blocked amount ? is it T+2 or T+3 ? Can i expect it by Tuesday ?
Contracts settled through physical settlement are illiquid closer to expiry. Any losses arising out of liquidation of position(s) with margin shortfall by our RMS team have to be borne by the client. It is advisable for a client to square-off such positions on their own or add funds to carry the position(s) to expiry.
Please explain this point by example sir
IF I CARRY A COVERED CALL IN RELIANCE SAY BUY 1300 CALL & SELL 1340 CALL & RELIANCE EXPIRES AT 1400
DELIVERY OBLIGATION IS NIL IN THIS CASE.
WHAT WILL BE THE BROKERAGE & STT CHARGED IN THIS CASE
Worst service provider…thy play agaisnt you as thy know…where retailers are taking positions…remember this market is game of probability…and I personally opened dmat ac in thr platform to know how thy are operating and how thy make money coz discount is not always free dont fall in trap…there are lot more with whom u can actually make money…
Dear Friend, I am new in stock market, I dont know how to take delivery in OPTIONS……….. please help me how to get this benefit.
I am in receipt of an SMS, can u advise which F&o stock is in compulsory physical state
SEBI New margin guidelines are to come to effect from the 1st of June and will benefit hedged positions. The margin requirement for all Stock F&O contracts increases 2 days prior to expiry (Wednesday and Thursday of the expiry week) to twice of the exchange mandated SPAN + Exposure margin required.
Is this likely to continue as before?
I have deep ITM PE option and I dont want to give physical delivery as I dont have shares in my demat.
Can I buy ITM call option to avoid giving physical delivery? Will ITM PE be netted off with ITM CE?
E.g I on expiry the spot price is Rs 1000 and I have 1100 PE and 980 CE then can it be netted off as on one leg I will have to give delivery and on other i will receive delivery. Will the net credit be 120 in my account(Rs20 CE +Rs100PE).
You can do that, but you’ll need to maintain sufficient margins for both positions in order to do so.
I want to open demat account, but my digilocker is not connected with zeroda. So please say another way to open demat account on zeroda
1.If i sell reliance 1000 pe at 100rs and on expiry day if it becomes zero and i couldnt buy back…then what happens?
2. Suppose by expiry it reached my put price and i wish to take delivery, what will be the process?
1. If it expires OTM, there won’t be physical settlement for that contract.
2. If its ITM, physical delivery will apply. If you maintain sufficient margins, the stocks will be delivered to your account.
Dear Sir,
I already have demat account and I applied for demat+trading account opening through zerodha, so a different demat account will opened by zerodha or my old demat account will be linked with trading account, please clear my doubt.
A new demat account will be opened with Zerodha.
I bought Hindalco 185 CE 7000 qty a few days ago (Current price 116 rs ) and now current my position is OTM.
I received a message regarding physical settlement
I found following statement above
OTM (Out of the money) options are those strikes that are above the final settlement price for calls and below the final settlement price for puts. There won’t be any delivery obligation if your call or put option expires out of the money(OTM).
What does this indicate ?
Your option expires worthless if it’s OTM and you don’t have to give or take delivery upon expiry.
If I have a “give delivery” position (short future, short call, long put) I will be allowed to carry the position to expiry only if I have the deliverable shares in my demat account.
What if I have the pledged the shares with Zerodha, Will I be still allow to carry the “give delivery” position ?
Please answer at the earliest as I do have the above mentioned position.
Pramod, you will need to unpledge the shares before 2 PM on the expiry day and this will be considered for the give delivery obligation.
Hello, There was a query above regarding short position in OTM PE getting expired worthless and client keeps all the premium.
Is this applicable for short position in OTM CE as well?
Yes.
I’ve Indiabulls Housing finance Call option 120 CE …. Since today morning, it’s not reflecting in my positions…. How can I square off
Hi,
I received the sms alert today on the physical settlement on my open positions. Please clarify on the ‘100% contract value’ requirement. (Is it the ‘Strike price * Lot size’ for the stock OR the Current Spot price). My positions are OTM currently.
eg.
Federal Bank – APR – 35 – PE – S
1. Additional Margin required to be maintained – 35 * 7000 (lot size) – Is this correct understanding else please explain.
2. Will collateral suffice for the additional margin.
3. As mentioned in few replies above, will the additional margin requirement kick in only when the position moves to ITM.
4. Also how does one avail the temporary funding for the margin shortfall with the interest, if needed.
Thanks
i have 1 lot short position in reliance future of April & 1 lot long position in option 1700 CE for hedging. Is there need physical delivery? what should i do? must i squire off the positions by AMO order now or should wait till Wednesday or till expiry?
I bought reliance PE 1360 Apr. I received a message from zerodha regarding physical delivery today. So if my trade goes out of the money.. wil I lose all premium that I have paid or will I get stock of reliance ?
Hello Sir,
If we buy a HeroMotoco option CE 1900 , but current share price is 1925 that position I’m buying CE 1900 & 1940 I sell them so how much our profit?
Hello Sir,
I have purchased one lot Put 120 OTM Option of RBLBank today ( 28.04.2020) and expiry will on 30.04.2020. CMP of RBLBank is approx 125. I don’t want physical delivery. My question is I will square off contract or RMS itself.
Aaftab,
Additional margins(100% of the contract value) will be applicable if the position turns ITM during the day. Our systems will square off the position if there is a shortfall after the margin is levied.
Hello Faisal,
During the day means what, Wednesday or Thursday??
100% margin applies throughout the day or at the end of the day?
And what if margin is not available? What is the series of events on such event?
This will be applicable from the beginning of the trading day tomorrow.
Positions will be squared off anytime during the day for margin shortfall.
Hi Faisal,
Thanks for replying.
Lets say I do add the 100% contract value in my account. I am a call seller. To hold position till expiry, the message received from Zerodha says “there should be equivalent shares in demat accout”.
Does this mean:
A) I have to purchase 200 shares of Britannia (6,00,000+ Rs) tomorrow itself?
B) Or just have 6,00,000 in my account as margin money
C) Or Both??
Hi, What is the update on physical settlement and margin required for short call option Apr month expiry.
Pk,
Margins will be charged at 100% of the contract value on the last days of the expiry.
Any other rule that requires shares in the demat for short call option similar as in March expiry
I think there is an error in the above write up, in first leg , 2nd leg you have mentioned as under :
1st Leg 2nd Leg
Long ITM Call Short ITM Put
Long ITM Call
it should be,
Short ITM CALL
& Long ITM Put.
Raj, thanks for reporting, this is fixed now 🙂
hii team,
As i have position in icici bank as per given below and on the expiry the rate of icici bank is Rs. 320
so for which position need compulsory square off with below deatils.
bought 20 lot of icici bank future
sold 15 lot of 300 CE
sold 10 lot 350 CE
sold 10 lot 360 CE
sold 10 lot 300 pe
sold 10 lot 250 pe
Unlike the classical definition of an options contract: Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date, it is now compulsory to exercise the option if it is deep in the money. If it is close to the money (CTM) as explained, it will not be exercised if the required margin is not maintained. Is there another way to disable exercising for CTM contracts?
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.
Suppose I bought banknifty 18300 strike calls @0.10 at end of the day and the same closed at 6.70 and banknifty spot closed at 18203 spot , will I get this 6.70 for my open positions of 18300 calls or will it settled at zero value
Vinu,
On expiry day, the close price of the option doesn’t matter. The settlement price for the option is determined from the settlement price of the underlying(spot).
In this case, since there is no intrinsic value(Spot is lower than the strike), the option will expire worthless.
Sir, in my account FM5886 an amount of RS 60000/- deposited from IDFC first Bank on 3.4.2020 at 9.40 AM is not credited. Pl do the needful. With regards Sheo Shankar Prasad
Best create a ticket on our Support Portal for account-specific queries like this.
Suppose I bought banknifty 18300 strike calls @0.10 at end of the day and the same closed at 6.70 and banknifty spot closed at 18203 spot , will I get this 6.70 for my open positions of 18300 calls or will it settled at zero value
Hi,
Under the heading Spread and covered contracts,
The second Leg required for the Long ITM Call seems wrong to me.
Kindly clarify
I bought ICICI bank 300 PE Lot at current Price 30 if we want to take delivery how much Money I need to have i my account and how to take physical delivere
NIFTY spot at 8700
Sold 8000 CE – 10 lots
Sold 9000 PE – 10 lots
Want to let it expire today.
What will be delivery obligation and margin etc implications?
Nifty is not physically delivered, so there’s no delivery obligation.
I got an email from Zerodha, about compulsory delivery of stock based on the options contract I hold.
I have Ashok Leyland options as :
1. 42.5 PE Short – qty 4000 pcs
2. 45 PE long – qty 4000 pcs
Prior to expiry can I buy two lot of (8000 pcs) of Future Contract to Net-off the position instead ? How the charges will levy on such ?
Anand,
Both these puts are in the money and already net off each other. There won’t be any physical delivery as long Ashok Leyland underlying remains below Rs 42.5.
Thanks Faisal, So does that mean, whenever I am long on PE (Sell the Put option), I have an option to cover that that with selling a Future lot before expiry to avoid the physical settlement ? Is there any issue with the approach ?
Based on the warning email from Zerodha, I got an impression that “in order to get a long PE option (Sell the Put option) to expire, I must have the stock in my demat.
Yes, if you have a short ITM put option, you can sell futures to net it off.
Another situation – I have Glenmark short call 340 Apr and long future Apr. If I hold these till expiry, will it result in physical delivery. I have sufficient cash incase delivery is to be taken w.r.t. long future but don’t have shares in demat to give delivery w.r.t. short call option. Pls explain different scenarios. Thanks.
If Glenmark expires above 340 on the expiry day, both these positions will be netted off and there won’t be any physical delivery obligation.
If Glenmark expires below 340, the long futures will lead to physical delivery and shares will be delivered to your account.
sir if i have CTM short call option and kept future long ,both position are open at expiry will they result in net off, or the CTM can net off future,which ITM can netoff. summary CTM can or cant netoff future?
I have shorted 1 lot (500 Qty.) of HDFCBANK 820 PE @ the premium of INR 45. I understand that I need to take delivery of if option ends up in ITM or CTM ( if excercised) provided that I have sufficient balance.
Please reply me for below situation considering that counter party exercised its rights.
1) HDFCBANK settlement price is 840. What will be my profit / loss. Is it Premium 45 – Intrinsic value 20(840-820) = 25 * 500 (1 Lot) = INR 12,500/- plus I will be having HDFCBANK 500 Qty. at the price of INR 820.
2) HDFCBANK settlement price is 780. What will be my profit/loss. Is it Premium 45 – Intrinsic value 40(820-780) = 5*500 = INR 2500/- plus I will be having HDFCBANK 500 Qty. at the price of 820.
Tomorrow is expiry day hence I will be very thankful if you answer this query at the earliest possible.
Pramod,
1. At 840, the position is OTM, you get to keep the whole premium. There won’t be any physical delivery obligation.
2. At 780, the position is ITM and is physically settled. You will receive the shares at a buy average of Rs 775(Strike Price – Premium received). You can realize the profit/loss from the stock received by selling it in the market.
Faisal,
consider the second case that pramod has mentioned. ( the one resulting in delivery of shares )
On tuesday, the week of expiry, suppose HDFCBANK closed at 750. So its clearly in the money.
1. Now on wednesday morning, am i required to have a minimum margin of 840 * 500 = 4.2 lacs ?
2. Say by wednesday/thursday afternoon, what if i have a balance of just 3.5 L in my account ? Will the RMS square it off automatically?
3. If the physical delivery does go through (assuming answer is NO for above question or if RMS failed for some reason), will zerodha pay for the shortfall of 70k and then levy a interest of 0.05 % per day until i add the remaining 70k correct ? Assuming HDFCBANK eventually closed at 750 on expiry.
4. [if i did maintain the balance] You have mentioned that its going to be a random assignment and the delivery of shares to me is not guaranteed. From your experience, could you tell how random is it ? Like 90 % of the time will get a delivery? Say i do not get picked in this instance, should i just consider myself lucky as i got to premium also and did not have to buy the shares at the PE strike price i sold 840 ?
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.
I want delivery pe how can I it’s 26 expiry .idfc k put hai or indusan ka put hai or tata moter ka put hai .abhe seb Mai loose hai. Delveiry kase like kel expiry hair. Kis say baat kru or kitna margin Dena hai
Mera pass CE aaj liya hoon… Nifty 6100 CE to iseka liya koi or extra charge lagaga…jo lagana tha…wo mein paid kar diya hoon….
सिद्धार्थ,
Nifty/Banknifty options are settled in cash. Physical delivery isn’t applicable to these.
Hi,
I have shorted one OTM put. Also, I am long on ITM put of the same stock. The expiry is day after tomorrow.what happens on the day of expiry if I don’t want to exercise the options?. The strike price of the long put is 840. Currently, the stock is at 790. Doesn’t the option expire at the intrinsic value?. Say, if the close price on the expiry day is 800 and if I don’t exercise the option, wouldn’t it gets sold and my account gets credited for 40/-.
Sudheer,
Since you have 1 OTM(short) and 1 ITM(long) position, this won’t be netted off. Yes, if you do not wish to exercise the long option, you will lose out on the intrinsic value of the contract. All Stock F&O contracts are settled physically, there won’t be cash settlement on expiry anymore.
Sir I have done one lot short today in MARICo @250 weather I have to maintain 100%margin for tommorow .if not done before market start what LL happen
Praveen,
That’s correct, 100% of the contract value will be blocked as margins.
If you don’t bring in margins during the day, your position will squared-off by our RMS team.
Hi, I have sold TATA MOTORS CE 150 Option MAR Month.
Do I need to maintain double margin during last two days of expiry – 25 and 26 March?
Currently its out of the money contract.
Current stock trading around 90 INR and my strike price is 150 if its not near to 150 why should one maintain double margin? Could you please help me in understanding this?
One more query on these lines:
◦The margin requirement for all Stock F&O contracts will be increased 2 days prior to expiry (Wednesday and Thursday of the expiry week) to twice of the exchange mandated SPAN + Exposure margin required.
– if lets say last 2 days.
Span Margin = 1000
Exposure = 900
Whether we need to maintain Margin:
(1000+900)*2 = 3800
or
(1000+900) + 1000
Please help me in understanding this.
Hey Deepak,
Yes, higher apply on the last 2 days before expiry. Margins required are 100% of the contract value this expiry due to higher volatility in the markets.
While your position isn’t ITM, the risk of it becoming ITM still exists(however low), hence, the increased margin requirements.
Great job with all the queries above. My query is what exactly happens in the below scenario:
1. I have a sell PE position (Rs 10 premium SP say 30) in Yesbank which went deep ITM. Say on expiry I don’t see sellers and by now the premium is say Rs 50. The rule says premium loses value if not squared off and physical delivery happens. So now my query is will I get the benefits of premium decay i.e. to keep my Rs 10 premium at the time of physical delivery @ 30 or the premium paid is lost completely or a premium loss of (50-10) + physical delivery or physical delivery @ 30-10 or something else?
2. deliverables and receivables doubt in physical settlement … correct me if I’m wrong.
ITM Sell position PE – lot size shares will he credited to our account. +8800 CNC
ITM Call position PE – lot size shares will be sold and we’ll get that 1 day to square off and settle it i.e., it will become intraday position for that day.
-8800 MIS
ITM Sell position CE – same as ITM Call position PE above. -8800 MIS
ITM Call position CE – same as ITM Sell position PE. +8800 CNC
Hope the above is what you meant by physical delivery.
if not then could you please explain with an example of what I’ll see on my terminal after settlement process is complete.
1. If you leave it to expiry, your short PE position will get physically settled(as long as you maintain the increased margins) and you will receive the stocks in your account. Essentially, you will be buying the stock at the strike price(30). Your P&L will be Premium received minus Intrinsic value.
2. A. ITM Sell position PE- Yes, the shares are credited to your account.
B. ITM Call position PE – You need to hold these shares in your demat account on expiry day. If you don’t, this will lead to short delivery and the shares will be bought in the auction session and settled to the exchange. Auction penalty will apply which could be upto 20% of the contract value.
C. ITM Sell position CE- Same as point B
D. ITM Call position CE- Same as point A
If I have long Future position and long ITM put position in the same stock on expiry, will there be any physical delivery obligations.
One creates BUY and other creates SELL positions. So I think there should not be any physical delivery obligations. Am I right?
How will these settlements be charged?
These positions will be netted off and there won’t be any physical delivery obligation.
Essentially there will be a buy and sell trade in your contract note on the expiry day.
How will the margin be calculated on such positions on last two days of expiry week?
How much money should I have in my account on the expiry to avoid any kind of penalty?
I have received message today to take compulsary delivery..I have only one call option for this month expiry..NATIONALUM 48 CE @0.05 .. but no buyers to sell this one.please let me know do i need to maintain margin..my id is RK0126
This option expired out of the money, so you’ll not be required to take delivery.
It written Long/short futures would be settled at average price, what does that mean?.
It needs to be settled at a settlement price, right?
Kaushal what it means is that for the purpose of P&L computation, the buy price(in case of take delivery) and sell price(in case of give delivery) will the settlement price of the stock on the expiry day.
For example, you have a long futures position in Reliance and you carry the position to expiry and it is physically settled. The buy average of the stocks you receive will be the settlement price of the on the expiry for Reliance.
ok, So basically settlement price would be the same as cash price on expiry day closing?
so if i have to give/take a delivery of reliance shares, the settlement price would be the average of spot price right?
How to convert my possitions
Click on the “…” on any position and click on the “Convert” button.
What are the implications and margin requirements for ITM call/Put on expiry day?Are extra margins required Real time to hold the position till 3.30 pm?
Till Wednesday one day prior to expiry it is 70% of (var/elm).
On Monday and Tuesday of the expiry week for ITM long positions, you have to maintain a percentage of VaR+ELM(as per the table above). On Wednesday and Thursday, you need to maintain 50% of the contract value if you intend to hold the position to expiry. Failing which your position will be squared off by our RMS systems due to margin shortfall.
I have a lot of Dr.Reddy FEB 3200 PE.. Currently ITM. I am most likely not meeting the increased margin requirements..
Will I be able to sell it of on Wednesday once market opens.? Does the physical delivery obligation applies if I sell it on Wednesday??
You will receive an email if you have such a position with details. Increased margin requirements are applicable from Wednesday, but you’ll be able to square-off the position.
I am new to options. I have few ITC stocks in my demat and wish to sell covered calls on them. My question is as an option seller can I close my position before expiry?
Yes, you can.
I purchased Axisbank Jan 740 CE EXPIRY DATE 30/01/2020
HOLDING IT NOW
MY QUESTION IS WHAT WILL
HAPPEN / SITUATION ON EXPIRY DAY
HOW MUCH MONEY NEED FOR THIS TRADE
Hi sir
I have shorted CE NBCC at 32 which is ITM and i have shorted PE NBCC at 42 wjhich is also ITM. Suppose at expiry NBCC spot price is 39. How P/L will be calculated ?
Thank you.
Both the options positions would have been closed out at the settlement price(The intrinsic value which is the settlement price minus strike price) on expiry.
So, that means, in netting off too, loss of put or call and gain will be realised?.
If I have a covered call and I let both options expire in the money. What would be the settlement amount?
For ex. I have long 500 CE Airtel and short 510 CE Airtel, do I still get benefitted if on expiry airtel is say 530 or all contracts value becomes 0 on expiry and I make a loss?
Your account will be net settled for the 2 ITM contracts you hold. You will receive a credit of Rs 10(+30 from 500 CE and -20 from 510 CE). There won’t be any physical delivery obligation.
Thanks for the prompt response. What if one leg is ITM and other leg is CTM?
As long as the position has some intrinsic value(Settlement price is higher than strike for CE and Settlement price lower than PE), it will be netted off.
From friday ownwards in expiry week…for long options are extra margins charged EOD ad not real time?
As when placing order it just shows that the total premium needs to be paid and no other margin.
Raj,
If you take an OTM options long position, only premium will be charged. Additional margins will kick in if the position turns ITM.
Para from your article above:
“OTM (Out of the money) options are those strikes that are above the final settlement price for calls and below the final settlement price for puts. There won’t be any delivery obligation if your call option expires out of the money(OTM).”
“There won’t be any delivery obligation if your call option expires out of the money(OTM).”
Why only call option what about Put option? plz update the article by including word put as well.
Xersis,
Have added puts too. This was omitted by mistake.
Hello sir..
I buy SBIN 330 PE NRML 1 lot on 23/12/2019 and If I close this trade tomorrow on 24/12/2019.
Is there any marrige required????
I have two puts of Idea,
IDEA DEC 5PE(Lot) and IDEA DEC 4PE(6Lot) and now there are no buyers for for this, please let me know whether it will expire with ZERO value or I have to pay some additional penalty for it.
I don’t want to do any physical settlement for this.
Kindly let me know what should I do to avoid any further loss in these options.
Best Regards,
Saurabh
As coming wednesday(25 th Dec) is a trading holiday, increase margin requirement for short stock options on what day? tuesday or thursday
The increased margin was implemented one day before on Tuesday as Wednesday(Dec 25th) was a holiday.
For long call options it is mentioned as extra margins start from 2 days before but last expiry extra margins started from monday of expiry week itself..why?
Raj,
While we charge margins from Wednesday, the exchange starts margins as a percentage of VaR+ELM of the underlying stocks from Monday (Expiry- 4 days). This is explained in the post above.
on expiry days if i bought a Put in the money and it goes zero how can i square off it and as per exchange
the buy put is a sell position so what is my auction price or which charges are debited into my account.
If it goes to zero, it will expire worthless and there won’t be any physical delivery obligation.
In case of long futures , if the fund fall short for physical delivery will it be compulsorily squared off or interest would be charged by zerodha ?
The RMS team will square off the position as soon as there is a shortfall. If it isn’t squared-off for any reason, yes, interest will be charged on the debit amount.
Appears the Risk management team needs a lot of training and in their anxiety do not follow the rules mentioned in this policy.
The policy is followed by the book by our team.
You can create a ticket on support.zerodha.com and we will have it checked for any account specific issues.
Why OTM options or ATM options we are not able to buy any particular reason we are paying full money and buying zerodha or sebi is not giving money or marigin
Goutham,
While you pay the premium, if the option turns ITM, you will be required to give or take delivery, which requires additional margins. This is why these are blocked on Wednesday and Thursday of the expiry week.
i have 4400 share of yes bank in my demat a/c.i sold 1 call of 75 and 1 call of 80 dec. contract. at the time of expiary dec. contract what margin will be required
The additional margin requirements as explained above will be applicable.
You can pledge the stocks you hold to fulfill the additional margin required.
Hi,
I have icici 510 ce which today it turned into itm
And my margin is showing negative now
Can i close my position tomorrow or is it compulsory to take physical delivery?
If you close the position before the expiry, there won’t be any physical delivery obligation.
IF the option selling/buying is hedged. And during the expiry any one leg is in ITM means. Do we need to take delivery or it will be net off. Please tell
Hey Srinivas, for physical settlement obligation to be netted-off both the positions have to expire ITM. If one position expires ITM and other OTM, you will have to give or take delivery of underlying shares for the position that expired ITM. You can check out the “Spread and covered contracts” section that explains net-off scenarios.
Hi Sir,
AS ZINC NOV future is expiry is on 29th NOV, but why the trading is not allowed from 22nd NOv itself. Please let us know,.
This post is related to the physical settlement of Stock F&O.
To answer your query, Zinc is a staggered delivery contract where the tender period kicks in one week before the expiry which is why this is blocked during that period. If the contract is held during the period, it is likely that you will be assigned physical delivery which is why this is not allowed.
Akshay,
1. Starting from October 2019, all Stock F&O contracts are being physically settled, hence, the margin is increased for all of them.
2. Yes, increased margins will apply on both the hedged positions, this is due to the risk of the client exiting either one of the legs of the hedged portfolio before expiry leading to physical delivery. However, on expiry, these hedged positions will be netted-off.
3. For short call OTM options, the margins will increase. For long call OTM options, there won’t be any additional margins as long as the position remains out of the money.
Thanks a lot for the answers. Just a last follow up question on that, margin increases to exactly double, right?
Yes, twice the NRML margins.
Hi,
I have a few question on margin requirement for F&O in the expiry week.
1.) Will all OR only selected stocks will attract increased margin?
2.) If the F&O positions are hedged (Long Fut and Short Call), then also increased margin policy applies?
3.) Does the increased margin apply to out of the money call options also?
Many thanks in advance.
What will happen if physical delivery of stock needs to be taken due to new rule of sebi on f&o and there is no funds available in account?
Hi,
Please elaborate Zerodha’s policy on below:
1) What is the procedure if a client (who is sitting in ITM position of a Long Call or Long Put) wish to exercise his/her contract well before expiry (any time before expiry) e.g. 10-15 days before expiry ?
2) How client should deal if there is early assignment to him/her well before expiry both in case of written Call & Put contracts ?
Thanks,
Kans
Kans,
1. In India, the type of options traded is European and you can exercise your call or put only on the expiry date. As long as you maintain the increased margin requirements till the expiry date and the position remains ITM, the position will be exercised.
2. As explained in point 1, there can’t be an early exercise or assignment of F&O contracts traded on NSE.
Hi Faisal,
So you mean to say the stock options are also European in nature in India?
Thanks
Kans,
There are 2 types of options contracts traded all across the world- American and European. American options can be exercised any time before the expiry, European options are exercised at the end of the expiry period.
In India, all options contracts traded are European type of options.
Thanks for confirming and clarification
Supposed traded (Buy) in BO for BANKNIFTY option on Expiry day.
While trading it is OTM option & later it becomes ITM option.
Do I need to pay/keep additional margin ?
Even if it is ITM options, Can I hold till 3.0 p.m. without additional margin ?
Akshay,
Index F&O(Nifty, Banknifty) continues to be cash-settled. This policy is applicable for Stock F&O contracts.
Hello Faisal,
Request you to address below queries:
1.If I have ITM Call option and I am unable to bring the required margin and for some reasons Zerodha couldn’t sqr off before Tursday closing, what are the consequences? i.e. what will be the gain amount to me?
2. Following Excerpt from above is not clear to me. Whether the client will get any of Rs 9600? or whether you guys will buy and sell simultaneously?
“For example: If you are long 1 lot of WIPRO Oct 19 240 CE and let it expire and WIPRO(Stock) settles at Rs. 243, this contract will be a CTM contract. The intrinsic value of this contract will be 3 [243-240] x 3200(lot size) = Rs 9600.
Post-market closing we will check if the client’s free balance (Cash balance + Rs 9,600) > Rs 2,76,518 ( Twice the SPAN +Exposure margin for WIPRO Oct future contract). If client balance is lesser than Rs 2,76,518, this position will be marked as “Do not exercise” and the option contract will expire worthless. If the balance is more than the SPAN+Exposure, we will let the option be exercised, resulting in physical delivery. All costs arising out of such delivery obligations will be applied to the client’s account.”
Thanks.
Saurabh,
1. On Wednesday, when the margin requirement goes up, you can square off the position at the prevailing market price and you will receive the premium. If you don’t square off, our RMS team will close the position due to margin shortfall.
2. Only after Thursday 3.30 PM, if your position remains open and you don’t have the margins in your account, we will use the CTM option where you will lose the premium(the intrinsic value of the contract).
Hi Faisal,
In above scenario if the client is fulfilled with the margin by EOD of expiry day then :- By when should the client bring the remaining amount (difference i.e 4,91,482/-) over & above the margin balance for physical delivery?
Lot size 3200
CE Strike 240
Exercise Amt. 3200*240 = 7,68,000/-
Margin = 2,76,518/-
Difference = 4,91,482/-
Thanks,
Kans
What will be the position, if I Buy BN Option in BO on expiry day ? Margin will be increased ?
Index F&O(Nifty, Banknifty) continues to be cash-settled. This policy is applicable to Stock F&O contracts.
Dear Faisal,
I had a 1 lot short future position in PIDILITIND till 31st Oct. The position is now expired. Please let me know about what happens next.
1. I has sufficient margin on the last day, I see my opening balance suddenly reduced? why is that? is this how it is going to stay and till when?
2. what is meant by physical delivery in case of short future positions? When and where do I see the holdings? How do I liquidate the delivery?
3. what are the next steps that I should take. Should I add funds?
4. I have read that the last Thursday of every month is the expiry day for that month futures series? Is that correct?
Ankush,
1, 2, & 3. Since you had short futures, you have a give delivery obligation of shares. Since you don’t have the shares in your demat account, a short delivery auction margin block is posted to your account. Once the shares are settled from the auction, the margin block will be reversed and the credit of the shares you delivered will be posted(minus the auction penalty).
4. Yes, last thursday of every month is the expiry day of the monthly futures series.
Many thanks Faisal.
Just one more doubt, quoting this from the forum.
The entire process:
a) On T Day Mr. X sells the stock.
b) On T+2 Mr. X fails to deliver the stock.
c) On T+2 when the shares are not delivered, the exchange blocks a sum of money from the brokerage’s account which is called “Valuation Debit”. The Valuation Debit is the closing price of the stock on the day preceding the Settlement day (basically, closing value of stock on T+1, as settlement happens on T+2).
d) On T+2, the exchange conducts the auction and purchases the stock from the auction participants on behalf of the defaulting seller.
e) On T+3, the exchange gives the shares to the buyer and sends an Auction note to the defaulting broker. The broker then passes on such auction charge to the defaulting client.
My question is when does the block gets released.
Regards,
Ankush
Sir 31 oct i bought bnifty 30100 call at 0.05 pase and i didn’t sell it . It went to auto settlement and settled after closing of market at 9.53 paise and bnifty closed at below 30100 .
Do i have to pay any settlement charges to exchange.??
Sir please help me.
The contract expired OTM, there won’t be any additional charges.
Today my bob call option got auto square off and i suffer a loss. I buy this option at cash only then why u need 2x margin. As i already paid cash for my purchase value then i dint have further risk, obligation from my as well as your side. Please look into.
Sunil,
Due to the cost of physical settlement of stock derivatives margins are increased 2 days before the expiry day. Hence physical delivery margin was levied on Wednesday and Thursday. All clients with physical delivery contracts were notified well in advance over email and SMS about the consequences.
Dear sir please advise if my understanding is correct
1. Wednesday we need to maintain 2x or required margin
2. Thursday or expiry day we can carry forward the Wednesday position if margin is there on Wednesday right?
3. On Thursday if we leave the position auto square off by 3.25 is it ok or not
4. What is physical delivery then ? Quiet confused
Thanks
Yusuf
Yusuf,
1. Yes
2. Yes
3 & 4. If you leave the position open until expiry, the position will be physically settled. Based on the contract, you will have to give or take delivery. If you close the position any time before 3.30, there will be no physical delivery obligation.
which price will be considered for the delivery
1) price on the day of expiry
2) price on which I purchased start of month
You have to give or take delivery at the expiry price.
Sir i have a position on bhel 45put which is out of money there is no buyer if I sell that is not selling will i get any charged for the open position
And i have a another position bhel 60 ce where buyres are available if I sell that on 30th oct my only open position only in bhel 45 pe
Plz suggest what to do if that put is not sell what will b charges
Abinash,
Since your put position is deep OTM, there won’t be any liquidity. Since it is OTM, there won’t be any physical delivery obligation.
Your BHEL 60 CE is also OTM, so there won’t be any physical delivery obligation. However, if BHEL moves above 60, physical delivery will apply.
I am long in Asian Paints Oct CE @ 1820….Can I square off my position at the market opening tomorrow I.e. on 30.10.19, Wednesday…?
Yes, there are no restrictions on exiting open positions.
I had buy one put of m&m strike price 610(lot size 1000 for m&m)
M&M – closes around 611 on today .i.e. tuesday
Is i needed to add money in the account and how much
If not have sufficeint fund when my position getting squared off on wednesday
Shrikant,
The position is still OTM, so there will be no margin block. Once it turns ITM(below 610), delivery margin block of 50% of the contract value will apply(610*1000*0.5=3,05,000).
The position will be squared off anytime during the day due to margin shortfall.
Am holding stock Future.
My understanding that only for stock option sell position in a contract will be compulsory physical delivery. And for Stock future we have to ensure you have sufficient margins to avoid your position being squared off.
Even stock futures are compulsorily physically settled. Margin block will be 2 times the SPAN+Exposure(NRML) margin.
I am holding OTM Put option, still I received the mail that I am holding deliverable option.
Can I exit tomorrow (30.10.19) ?
Akshay,
Yes, there will be no restriction on exiting your open positions.
You were notified because if your position turns ITM, there will be physical delivery margin block and you can be better prepared for that.
At what time does squaring off take place on Wednesday if margin is not maintained?
It will be squared-off anytime during the day if there is a margin shortfall.
Please provide phone no , or chat for help regarding options . I have following position.
Coal put 170 sold
Nalco -41 pe sold
Nalco -39 pee buy
What happened on expiry.
Sanjay,
You can reach out to our Support team on 080-40402020 for any support queries.
Guys I’m very confused by this stuff as I’m newbie to option trading. Let me give my example, I’ve purchased 1 lot of Yesbank CE 65 today which is trading at 58.10 EOD (Around 2200 rupees) Can I sell that option tomorrow or do I need to maintain balance or exactly what I am suppose to do???
Please help? If I have to keep funds how much should I keep? Please help me out team zerodha!
Its real important!
Kapil,
Your position is currently OTM, so there is no additional delivery margin blocked. If it remains this way till expiry, there won’t be any physical delivery obligation either.
If your position turns, ITM(Yes Bank spot above 65) before the expiry, margin block of 50% of the contract value will be applicable. After expiry, you will receive stocks equivalent to the lot size of the contract.
Will I be sell ITM options on Wednesday?
Yes, there are no restrictions on exiting open positions.
0.5% charge on deliveries arising out of the contract obligation is too high on top of the 0.1% STT. Any chance of reducing this in the future?
Raghu,
The high brokerage is charged to disincentivize clients to carry their position to expiry as it adds both an operational overhead as well as the risk of margin shortfall to us(Zerodha).
It is recommended that you close your position before expiry and move on trading to the next month’s contracts.
Hi,
In case if purchase 1 lot(3000 shares) on Tuesday with delivery for Thrusday, along with selling the call option of ITM, will it suffice the requirement of availability of physical units for settlement.
Thanks
Sourabh,
Yes, this will fulfill the delivery obligation. However, you need to maintain margins in your account(2 times the NRML margin) to carry the short ITM call position till expiry.
I have some BUY OTM positions, should I add funds to avoid auto square off ??
As long as the position is OTM, so there will be no margin block. Once it turns ITM, delivery margin block of 50% of the contract value will apply.
i am having only F&O account .i take a stock futures lot suppose i hold it upto expiry date. what may happen ?
cant understand what to do or what not to do pls intimate with details
What happens if the client not maintain sufficient margin on Wednesday morning? Does the RMS Team square off the position on Wednesday? At what time does it square off? Towards the end of the day on Wednesday?
Nalini, the position will be squared off anytime during the day due to margin shortfall.
What happens on Tuesday morning if you have sold a straddle – say 1 lot short of Reliance call option of 1,250 strike and also 1 lot short of Reliance Put option of 1,250 strike.
Aniket,
Margin requirements will go up on Wednesday of the expiry week. If either of your position ends up ITM, there will be physical delivery obligations as mentioned above.
Hi
One doubt
If I sell Nifty pe at 50
And I forgot to close it and it touches 0,
What is the result
50 points profit
Or
Total amount loss
Kindly advise
Suresh,
To begin with, this policy is for Stock F&O contracts only. Index F&O continues to remain cash settled.
For your query, since you have shorted the contract, you make a profit of 50 points. You should read this chapter on Varsity to understanding how options writing/shorting works-
Financial implications or how the following (eg) Stock Option open position, at the end of the series is treated.
EXIDE 180 CE, Bought at 2, spot close
(a) 182/- above and
(b) 182/- below.
(Educational purpose) 😅
Chandrasekhar,
Your buy price will not have anything to do with the physical settlement except for your P&L calculations.
If Exide,
a. closes above 180(the strike price)- The contract will be physically settled, if you have sufficient margins(as illustrated above), you will receive Exide shares equivalent to the lot size.
b. closes below 180- The contract will expire worthless and you there will no physical settlement obligation.
Pls send my username and password than after start buy and sell
Thanks
Santosh Kumar Singh
Hi,
Will this be applicable to Nifty and bank nifty options as well.
Physical delivery is only applicable on Stock F&O. Index F&O continues to remain cash settled.
In my understanding, there will be no additional margin required for trading in next months options and futures on the expiry day of near month. Also, settlement will only happen on next month expiry. Kindly confirm.
Colin, that’s correct, the additional margins(2 days before expiry) will only be applicable for the current expiry.
I have Nov. 2019 series contracts, although i got this mail? why ?
Hemant,
The email was sent out to all our F&O clients who would be impacted.
If I buy put and sell before expiry if physical settlement required?
SK,
No, this is only applicable if you carry the position to expiry.
How does this rule impact Nifty and BankNifty options for MIS as well as NRML
Physical delivery is only applicable on Stock F&O. Index F&O continues to remain cash settled.
Suppose 500 shares i have in demat account. I have a short in CE. I am willing to give those shares against CE. Then how to communicate this to zerodha. Since this is covered call, communication is automatic or i need to inform separately.
Since i already have delivery and inform you, and process is very simple, your delivery charges of 0.5% will still be applicable. Also please since i have 500 shares in demat account, for shorting CE what margin is required. It is simple logic since i have those 500 shares in demat account. You should not charge any charge @ 0.5%. Since it becomes Covered Call. It should be treated as netted off position and should be charged only @ 0.1% for settlement. Is my understanding correct.
Please mention margin requirement of shorting CE (lot size is 500 only) in reliance against shares lying in demat account 500 shares. I have equivalent amount of shares in demat account.
1. The shares will be automatically debited if you have a delivery obligation.
2. Yes, brokerage will still be charged at 0.5% of the contract valie.
3. You still need to maintain margins(2 times normal SPAN+ Exposure) for the short ITM call till expiry.
@2. Yes, brokerage will still be charged at 0.5% of the contract value.
What is the contract value here? Can you please clarify? also any other charges for taking/giving delivery?
It is applicable in intraday
Dileep,
Yes, this is applicable for intraday trades also. However, with MIS, you will be charged a percentage of the total margins applicable. Do check out margin calculator for more.
Hi Faisal,
The Zerodha calculator shows Span + Exposure Margin requirement for positional trades.
Where do I find out the Span + Exposure Margin requirement for intraday trades.
You can check here https://zerodha.com/margin-calculator/Futures/
Is this applicable to index options as well
Physical delivery is only applicable on Stock F&O. Index F&O continues to remain cash settled.
Sir today i bought bank nifty 30100 call at 0.05 paise and bnifty spot closed below 30100 but option settled at 9.35 rs.
And i didn’t squared off my position ,
Do i have to pay any charge for this settlement to the exchangs.
Please check -171834.77 kyu dekha raha please check ans me sir
What is the implecation on index futures (nifty)..?
Physical delivery is only applicable on Stock F&O. Index F&O continues to remain cash settled.
If margin will charge 2 day before expire then what is the margin % required in this two day.
As per the sebi circular it’s saying that margin will charge 4 day before like 40, 50, 60 & 80%.So kindly clarify.
Duryodhan,
It is twice the SPAN+Exposure(NRML) margins charged.
Very bad service because mail regarding such policy given on Sunday I. E 27 oct now how can u arrange such margin in short period of time….
Nilesh,
Physical delivery margins are being levied from July 2018 for Stock F&O contracts. This update relaxes the margin requirements to the last 2 days before the expiry.
Sir,
If I am not squared of OTM option call then any extra charges do I have to give
No.
From earlier margin requirements of 40,50,60 and 80… from Mon-Thurs, what is the new margin rate? Is it 60 and 80 as now its only Wed / Thurs. Pls clarify
Raj,
It is twice the SPAN+Exposure margin(NRML). It varies from contract to contract.
I m having a long put option of ashok Leyland and Tuesdays market session is over can I square off it on Wednesday. Is there any charges will apply for this. And till what time on Wednesday I should square off
Is this settlement policy applicable to MCX CrudeOil futures also??
No, this is only for Stock F&O contracts traded on NSE.
Crudeoil on MCX continues to be cash-settled.
Can you make a video citing examples for this new settlement policy it would be really helpful.
Prior thanks.
Kds,
I have passed this suggestion to our content team. They will take a call on this soon.
Thanks.
Dears,
I am stuck in the following situation. Could you please help me to understand what is going to happen.
I am outside of India for time being and I have recently took YESBANK OCT 60 CE option which I am holding still not knowing that its part of mandatory delivery process. I don’t have any funds to take the mandatory delivery, will it be squared off automatically. …please provide inputs asap before market opens tomorrow if possible so that I can act on it if there is any possibility to reduce the loss.
Thanks a ton…
After supplying the required extra margins to support the trade till expiry day, what would be the cut off time to close the open option trades to avoid physical Delivery process. As long as we close the trade by 3:15, we are not obligated to take the physical delivery , right? Please confirm.
Krishna,
Yes, as long as you close the position before market close(3.30 PM), there won’t be any physical delivery obligation.
Do note that liquidity in most physically settled contracts dries up in the last hour of trading(wide bid-ask spreads, etc).
Lets say I have below Short options in Axis bank,
720 CE Short Oct – one lot
730 CE Short Oct – One lot
740 CE Short OCt – One lot.
The margin calculator shows Span Rs: 3,46,368 + Exposure margin Rs: 2,50,600 which totals up to 5,96, 968 INR. So how much margin I should be having for last 2 days of expiry ( tomorrow and day after ). Is it double the amount of 5,96, 968 INR or more than that?
NEed your help to understand how much additional funds we should have
How will the settlement happen if I have a call option for a stock and I have also sold a put option on the same stock? Lot size is same. Example Bought the Federal Bank 105 call at 0.25. Also sold the 70 put at 0.35.
Manoj,
Both long call and short put are take delivery position, you will receive delivery of the shares.
However, in this case, physical delivery is applicable to the contract which is in the money.
Consider a scenario I have short 100 CE of YesBank and YesBank trades around 55 during the last week of expiry. Do I need to have increased margin even if it trades very far out of Money(OTM) ?
Yes, the margins will go up as explained above for all short options positions.
Hi Faisal,
What if a CALL/PUT contract expires EXACTLY @ ATM?
In this case, it will be dealt as CTM (close to money).
Kans,
As Nitesh explained, this will be a CTM contract.
If you have long options, if you fulfill the margin requirements, it will be physically settled. Otherwise, it will be marked as do-not-exercise(you will lose the premium).
If you’ve written options, depending on the counterparty(the long option buyer), the position will be exercised or not.
What do you mean by If you’ve written options, depending on the counterparty(the long option buyer), the position will be exercised or not.
I have written a call option and it expired in the money.. Also I didn’t close my option.What will happen in this case? Even I don’t have shared to deliver.. How to know the details of this
Sir i have Maruti 7400Ce 300 lot of sep expiry will there be any additional charges applicable at the settlement i have already loss of 15000 amount as premium has came down from 52 to 1.5..please guide..?
What you mean by sufficient fund
Does it means cash with you or it includes the present valuation of the shares in my account
How can I apply for physical shares for my options trade
Hello,
How does this rule impact index option writing for MIS as well as NRML categories? Or there is no impact at all?
Please clarify.
Thanks.
Physical delivery is only applicable on Stock F&O. Index F&O continues to remain cash settled.
If we took delivery on expiry, what will be the tax implication ?
Will it comes under Short term capital gain (Taxed under 15 %) ?
or
Business income (Taxed under normal slab ) ?
Sir
In the Positions Tab of Kite, is it possible for you to highlight the positions that would attract higher margins near expiry day ? The highlight could be in bold or in different colored instrument name.
The highlights should change automatically with change in the price of underlying, as the position moves in or out of ITM and CTM position.
This would help us immensely to focus on taking necessary action on highlighted positions well before enhanced margin requirements kick in.
Alind,
I’ll pass this suggestion on to our product team.
As per exchange guidelines physical delivery margin would attract from Expiry – 4 days.
Eg. If expiry lying on Thursday then margin would get charged from positions carry on Friday EOD & which would in increase manner from 20% to 80% till Wednesday.
It would attract as per below calculation ; Strike price * qty (lots) * (percentage of var+elm+additional margin if any in cash market) * 20% and so on
Sir, it means any how client have to square off open position call/put 2 days before expiry i.e. by Tuesday in order to avoid extra margin as per sebi rule. Am i correct sir ??? Please confirm.
Dinesh,
Yes, if you close the position by Tuesday EOD and move on to trade the next month’s contracts, there won’t be any physical delivery margin and settlement to deal with.
Sir, OTM call options will not be liable for physical delivery?
otm option has no obligation for physical settlement
Hi sir.. I have Ashokleyland 82.2 CALL option now the stock price is 35rs I’m already in loss of 6000 rs, now the option price is .05 I’m not able to sell this option, is there any penalty will I get? And how I will exit my position ?please reply me sir.
If have the position in long future & short call position in same contract & at EOD underlying price closes at ATM then it would results in netoff position or would results in delivery???
SunTv 520 strike CE & underlying closes vat 520
Have long future positions also
Dipesh, in this case, since the contract is netted off, there won’t be a physical delivery obligation. This position will be internally set off.
If buying long options in between 4 days of expiry then there would be requirements of premium + applicable margin of 20% or 40% or 60% as prescribed by exchange to avoid short margin penalty.
Dipesh, entering fresh long options positions will be disallowed from Wednesday of the expiry week. If you have an existing long options positions which is in the money(for which you’ve already paid the premium), the additional margins explained above will be applicable.
I am holding long future position and tomorrow is future expiry date, can i still settle it through going short or i need to buy the lot?
Hi sir,I bought SBIN JUN 190CE. Now SBI is trading at 192.40. expiry for this contract is day after tomorrow 25/06/2020. but I bought it for premium 8.90.lot size is 3000.but now the premium is around 5/-.i don’t have enough money to maintain margin.but I am anticipating that it SBI is bullish.what should I do.up to what time I can wait with out maintaining margin.is it ITM contract now.please reply me sir
Since you bought the option, you will have paid full premium. However, since this option is ITM, you will need 50% of the contract value (192.4×3000) to hold this till expiry since this may lead to physical settlement.
It is a CTM situation you have an option whether to take delivery or not, if you want delivery than you have to maintaiin margins as mentioned in the above reply by Matti.
Sir on 26/10 / 23 totally unaware of the fact that it was IDFC banks monthly expiry, I took a 118 CE trade 2 lot at the premium rate of 0.55 . So the total cost incurred 20000*0 .55 = 11000/ . but at the end of the day I couldn’t square off my position and the very next day means Friday ( on 27 the Oct,2023) all the 20000 IDFC Banks shares physically delivered to my account and My account balance is showing a huge amount of negative Balance. But, according to your say and general rule I should not be allowed to enter such a risky business and I was astonished why I was even allowed to purchase such share where it was the expiry week and even yesterday ( 26th Oct,2023) itself was the monthly expiry day. But , you are saying buyers are not allowed to enter fresh buy position before 2 days of expiry, but I was allowed and even got delivered the whole 2 lot whopping 20000 IDFC shares . Plz advice me how to manage this situation ???
Is this policy applicable to nifty and bank nifty??
I guess not applicable to index futures and options
What about Nifty and Bank nifty options ?
No, this is only for Stock F&O.
Nifty, Banknifty and NiftyIT contracts continue to be cash settled
Hello, any stock options settled 1 or 2 days before expiry needs physical settlement????
Is physical settlement applicable only if stock options not settled on expiry date???
It’s 2nd point
Neelesh, only if the contract is open till market close of the expiry day, will there be any physical delivery obligation.
Sir can pledge share can be given for physical delivery incase of short sell.pls confirms
Bandana, you need to unpledge the shares on Thursday before 2 PM(expiry day) to be able to fulfill the physical delivery obligation.
Physical delivery ?
What is best time to unpledge incase of liquid fund ?
Sir I bought call option of 200 CE Exide for Oct expiry on Monday that is 29th Oct and did not sell on 29th. So my position will goto 30th Oct. If i sell my position on 30th(Wednesday) Oct IntheMoney..do i have these implication on margin requirement and physical delivery settlement
Sir i took one ce position on tuesday.I will closed it on wednesday by keeping approptiate margin.Do i need to take physical delivery of that if i already squared it off?
The extra margin for physical delivery can be in pledged security and 50 percent of this is not required to be n cash like it is for span and exposure margin.
Please confirm.
Amit,
The margin reported to the exchange will still be SPAN + Exposure margins(which have to be 50% in cash and 50% pledged). This is charged over and above that and can be fully funded from pledged collateral.
I have fully funded additional margin requirement by Zerodha on account of physical settlement of derivative in Dec series I have been charged interest of Rs 25 each for Dec 24 and 25th Why?
I have fully funded additional margin requirement by Zerodha on account of physical settlement of derivative in Dec series through collateral I have been charged interest of Rs 25 each for Dec 24 and 25th Why?
Is Physical delivery also applicable for ITM Nifty Index options?
No.
How to convert stock options selling into physical delivery on expiry days in Zerodha kite
In case of Long positions in Options, you’ve mentioned – “There will be a physical delivery margin charged for all In-the-money(ITM) long options. This will be twice the exchange mandated SPAN + Exposure margin charged for the respective futures contract for the same expiry.”
When is the margin charged? At the time of purchase itself or 2 days before expiry?
This will be charged on Wednesday and Thursday of the expiry week(2 days before expiry). During purchase, you would require to only pay the premium.
If margin will charge 2 day before expire then what is the margin % required in this two day.
As per the sebi circular it’s saying that margin will charge 4 day before like 40, 50, 60 & 80%.So kindly clarify.
What about Nifty and Banknifty options (both Call and Put).
Please clarify.
Sir requesting to you NIFTY and BANK NIFTY going to call put side give me some index points call
In case … There were no buyer for exit position…then what will happen
What will be the charge of Option ?
Hi Faisal,
It’s mentioned that long CTM exchnage has provided an option of not to excerise, in the above example what if one hold a Wipro 240 pe and wipro.settles at 237, does CTM applies to puts also
Pls send my username and password than after start buy and sell
Thanks
Santosh Kumar Singh
Those who have only trading account how can thy take dilivery without demat account this physical settlements are not good for only trading account holder this physical settlements are not good and very high cost and risky
Appears the Risk management team needs a lot of training and in their anxiety do not follow the rules mentioned in this policy.
Pathetic service by Zerodha. I tried calling multiple times to understand why my cash balance is showing wrong but it was frustrating to get no response. Today I got to know I have calls of compulsory physical delivery stock and they want me keep sufficient margin. I never got any message at the time of buying or even later that it will be for compulsory delivery. They should not allow buying if client doesn’t have sufficient margin. It’s frustrating nad huge losse because of Zerodha’s
Why losses, this system of compulsory physical delivery is only for those contracts who is ITM situation, there is only one additional burden from past system of cash settelment that you have to maintain fund for taking compulsory delivery.
It’s frustrating not to get any response from Zerodha for multiple calls and why do they allow buying if client is not having margin. I understand calls always paid in advance so never was informed by Zerodha that it’s for compulsory physical delivery stock. Huge loss because of Zerodha.
Losses? Can you explain your situation?
I think he bought the call and it was ITM till expiry. Because he held till expiry, it got exercised and he had to take physical delivery of the shares. So he has to dish up that amount and other charges and brokerage involved with that.
My itc 205ce current price is 0.05 with 1 lot..as its 0 only…so delivery for me is not required right na??
What if there is no buyer or seller in far OTM or ITM option how it will be exercised or what will happened in physical delivery process ?
I bought options in normal delivery in expiry date what will happen
Hey Abhisheke, please check out this post for a detailed explaination.