Policy on settlement of compulsory delivery derivative contracts

What does compulsory physical delivery mean?

As stated in this SEBI circular, starting 26th July 2018, F&O positions in the 46 stocks mentioned in this NSE circular will be settled via compulsory physical delivery(Current list of stocks can be found here). If you hold a position in any of these contracts at expiry, you will be required to give/take delivery of stocks.

The deliverable quantity is computed as under

  1. Unexpired Futures
    • Long futures shall result in a buy (security receivable) position
    • Short futures shall result in a sell (security deliverable) position
  2. 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
  3. 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

The quantity to be delivered/received shall be equivalent to the market lot * the number of contracts which 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

  • Span + Exposure margin for all contracts which are going to be physically delivered will be increased 3 days prior to expiry or on Monday leading to the Thursday expiry in the following order.
Day Percentage of Contract Value
E-3 Day 40%
E-2 Day 50%
E-1 Day 60%
Expiry Day 80%
  • 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 till expiry and result in physical settlement.
  • If the SPAN +Exposure margin is higher than the above-mentioned margins, the exchange margin will be levied.
  • So for example, if the margin required for RCOM futures is normally 25% as SPAN+Exposure of contract value, it will be 40% of contract value on Monday leading to expiry.
  • You can check for all SPAN and Exposure margin on our margin calculator. Alternatively, you can check for these normal %’s on margin PDF file.
  • 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.

Long/Buy option (Calls & Puts) positions

Exchanges have defined Close to money (CTM) contracts which are a subset of ‘in the money (ITM)’ or contracts which expire with some intrinsic value.

  • For Call Options – 3 ITM options strikes immediately below the final settlement price shall be considered as ‘CTM’
  • For Put Options – 3 ITM options strikes immediately above the final settlement price shall be considered as ‘CTM’.

The exchange has mandated that even long call and put options will require margins to be blocked starting from the September expiry. The margins will be applicable 4 days before expiry.  This will be charged as a percentage basis on the applicable VaR + ELM of the underlying contract in the following order:

Day Percentage of VaR +ELM
E-4 Day 20%
E-3 Day 40%
E-2 Day 60%
E-1 Day 80% (of the contract value)

For example, RCOM has a VaR+ELM of 23.22%. On E-4 day, the delivery margin will be 20% of the VaR+ELM which is 4.64% of the contract value. If you have RCOM 17.5 CE, you will be required to have Rs 22,755 (20% * 23.22%(VaR+ELM) * 28000(lot size * 17.5(Strike price)).

On the expiry day, you are required to maintain 80% of the contract value.

For ITM Put options, you need to hold deliverable shares(equal to the lot size of the contract) in your Demat Account on the day of expiry along with the applicable margins mentioned above.

OTM (Out of the money) options are those strikes which are above the final settlement price for calls and below the final settlement price for puts.

Policy regarding Close to Money contracts (CTM)

Exchanges have provided an option to not exercise CTM contracts. We will be using this option on expiry day in case the unencumbered net-worth (explained below) of the client’s account (Cash balance + Value of Stocks in Demat account + Intrinsic value of Option Premium) is less than SPAN+Exposure margin (Exchange mandated) or 50% of contract value whichever is higher required to take a position in the Future contract of the same stock for the next expiry.

For example: If you are long 1 lot of RCOM July 12.5 CE and let it expire and RCOM (Stock) settles at Rs. 13, this contract will be a CTM contract. The intrinsic value of this contract will be 0.5 [13-12.5] x 28000 (lot size) = Rs 14000

Post-market closing we will check if Client’s free balance (Cash balance + Value of Stocks in Demat account + Rs 14,000) > Rs 1,02,000 (SPAN +Exposure margin for RCOM Aug future contract) or Rs 1,82,000 (50% of contract value). If client balance is lesser than Rs 1,82,000, 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 obligation will be applied to the client’s account.

For long put options, if the deliverable shares are not available in the demat account, they will be marked as ‘do not exercise’.

Note – Collateral holdings and mutual funds won’t be considered as part of net-worth of the client’s account.

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.

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.
  • Margin penalties will be charged as prescribed by the exchange for all F&O positions(including long option contracts)
  • Since there is a substantial increase in effort and risk to settle these F&O positions resulting in physical delivery, a brokerage of 0.5% of the physically settled value will be charged.
  • 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% of the contract value for both the buyer and the seller of the contract.
  • 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

Additional Notes

  • 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).
  • VaR stands for Value at Risk is the minimum margins charged by the exchange in the cash segment. This is designed to cover the losses of a share based on its historical price trends and volatility. The extreme loss margin aims at covering the losses that could occur outside the coverage of VaR margins.
  • Unencumbered net-worth of an account comprises of free cash, value stock holdings (that are not pledged or have any other lien against them). Value of mutual fund holdings or collateral received from pledging of stocks/mutual funds will not be considered when calculating unencumbered net-worth.
  • 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.
  • Starting from the October Expiry, you will be able to take fresh futures and option short positions in the expiry week till Wednesday(Expiry-1 Day). The allowed product types are NRML and MIS.
  • This policy may be changed at the discretion of the RMS team.

You can read the FAQ on this policy here. Also, make sure to read these NSE FAQ documents – 1 & 2.
The NSE circular on delivery margin for long option contracts can be found here.

With all this in consideration, it is advisable for a client to square off all positions on your own before expiry.

List of stocks with compulsory delivery are updated in this Google Sheet

154 comments

  1. johar says:

    If I have a debit or credit spread i.e. One long call and short call of next strike price vice versa and if I let them expire, how it will be treated.?

  2. Vipin singh says:

    I have call option of Jul rcom. How I sell or square off

    • Sunny says:

      I also have call option of RCOM 25 CE.

      Out of money options (worthless ones) will not be eligible for physical delivery. So dont worry just let it expire worthless.

      But be careful of one thing, what if RCOM suddenly jumps up on Thursday, and your option becomes In the money? Just be careful on expiry day and square off your option if you can. Otherwise if its worthless and cannot be squared off, no need to worry.

    • Faisal says:

      I’m assuming you have a buy position. If it remains out of the money on expiry, it will expire worthless.

      • Ranga says:

        Hi I bought RCOM 35 CE option and i cant able to sell. And now LTP is zero so it worthless right? And do we need pay any other charges for that ?

      • Jitendra says:

        Hi,

        I have Oil India Put sold one ITM and Bought one OTM at different price. So will it be auto net off on expiry day or I need to square-off before expiry …. Please guide.

        Regards,

  3. Bhushan Sharma says:

    Hi ,if I have ,say KSCL,4 Lots and enough margin available in my Account even if I take 30% additional margin into account then Can I carry forward my position till expiry day not like this month Zerodha decided to auto Sq off on Monday post 12PM.

    • Faisal says:

      Yes, you can let the position expire and be physically settled, if you continue to maintain margins of at least 30% of the contract value.

  4. Ravi Chouhan says:

    Hi, Suppose I have Rcom Fut Short position and have sufficient margin to hold till expiry. If physical settlement happens, so how will its settlement process take place?

    • Ragav says:

      On Expiry day you should have shares in your demat to deliver as you are short in future, otherwise your position will be closed irrespective of margin in your account as it will result in auction settlement.

  5. Narasimha mogera says:

    I have ifci 15pe position of current month, what will happen.

  6. vilas says:

    hi i use to trade bank nifty option weekly is this applicable to same or it is applicable to only monthly expiry

    • Lindo says:

      The above is applicable only on derivatives of stocks of those 46 companies. It is not applicable on index derivatives.

  7. N VINAYA BHUSHAN says:

    I HAVE A PUT OPTION SYNDIBANK 18 AUG PE @ CMP 1.1 WHICH I WANT TO SQUARE OFF . SYSTEM IS NOT SQUARING OFF AT CMP . HOW TO SQUARE OFF .PLEASE APPRISE

  8. Varadarajan says:

    Dear concern I have bought jpassociat17.5ce July contract at 0.25 presently it went 0.05 no buyers at market now. Is it will square off immediately or it leads me to take any physical sticks please reply

    • Faisal says:

      Since it is OTM, there aren’t any buyers. The contract will expire worthless. There won’t be any delivery obligation

  9. vivek says:

    so presumably all index derivatives will continue to be cash settled bcoz theres no corresponding underlying……….

    1)will the exchange, at some point in time, change this too by requiring traders to buy a prescribed qty of the entire range of stocks that make up the index derivative?

    2)hopefully commodities, currencies, interest rate futures will remain cash settled. right?

    • Faisal says:

      1. The SEBI circular only defines Stock Derivatives to be physically settled. Physically settling whole of Nifty 50 (or other indices) stocks would cost about 50 lakhs(approx) worth of stocks. Also, exchanges around the world settle index futures in cash(we shouldn’t expect any changes in India too)
      2. Most of the commodities are cash-settled. However, MCX is moving towards settling them physically(Gold, Silver, etc) and we will see this happening for more contracts soon.
      3. Trading in foreign currency is not allowed by the RBI for retail traders, hence, physical settlement will not be possible for currencies too.

  10. Ashwani kumar says:

    Thank you for sharing contents which are very useful.

  11. Prakul says:

    HCC spot = 12

    I write 1 lot of HCC 20CE @ 0.10

    If on expiry 3:30pm HCC closed at 15.

    So, whether I need to give physical delivery or not?

    • Faisal says:

      Unless HCC crosses 20, the calls will remain OTM and you do not have to give delivery(The contracts will expire worthless)

      • Prakul says:

        But, I got mails 2-3 times from support & RM team of Zerodha.

        Also, I call to Zerodha….

        They told me compulsory physical delivery needed even if option expires worthless.

        Unfortunately, I closed corresponding position.

        • Faisal says:

          Prakul, I believe our Support team informed you to maintain additional physical delivery margins(explained in the post above) as you kept holding the position till expiry.

  12. Kishor says:

    Hi, under the heading “Futures and Short Option (Calls & Puts) positions”, you have only mentioned about margin but, in case of short call option, the requirement should be availability of required no of underlying shares in demat account. If underlying shares are present in the account then there should not be any requirement of further modified margins. And for safety of individual and zerodha too, required qty of shares may be locked from monday evening till expiry till individual does not square off the short call option.
    Regards.

    • Faisal says:

      For both Short Calls and short futures, you are required to have the stock in your Demat which will be debited in case of delivery. As a broker, we cannot block your shares from Monday(we can only do it after expiry), hence, we block the margins to cover risk in case you end up selling the shares.

      • Praveen says:

        Why r I playing so safe. If I have 10 to 20 lacs worth of shares, I m not going to flee away. Even cash can’t be withdrawn in 24 hours. You are a discount broker that doesn’t mean discounted use of brain also.

  13. Sidharth Kumar says:

    Two doubts

    1. If I have a doubt regarding whether or not the intrinsic value of my options is sufficient as margin requirement… Is there any indicator or flag which I can check to see whether or not I’m meeting margin requirements for a particular CTM position so it doesn’t expire worthless.

    2. If physical settlement happens, can I BTST sell the same shares on following Friday (or next day)… Trying to approximate a cash settlement with much higher fees…

    • Faisal says:

      1. Unless you have Deep ITM options, the margins won’t suffice. Maintain margins as mentioned in the post. The same is updated on the Margin Calculator.

      2. No, the shares will be delivered to your Demat only on Expiry+ 2 days(Tuesday).

  14. Vamsi says:

    Hi – is there any update on the 46 shares listed for physical delivery earlier for this month (August)?

  15. Prakash Bandagar says:

    How many days before I have to square off my derrivative position to avoid physical settelment

    • Matti says:

      You need to square off your position before expiry if you don’t wish to take physical delivery. However, the liquidity is quite low close to expiry, so you’ll have to plan your trade accordingly.

  16. Sneha says:

    I bought infy call in option at 11.25 price…nd nw it z 1.80…what shuold i do nw??

    • Faisal says:

      If it expires out of the money, you don’t have to do anything.
      If it turns ITM, margins will be blocked as mentioned in the post above.

      • Saba says:

        So,until the position is OTM-We don’t want to maintain additional margin,only if it reaches ITM anytime in expiry week we need to ensure this additional margin, am I right?!

  17. Vijay says:

    I have a few call options for the August expiry. Till what date/time can I hold them before Zerodha squares off my positions.

    • Faisal says:

      For Futures and Short options, we have already blocked margins(mentioned in the post above). If your account falls into negative balance, our team will square off your position after sending you a margin call.
      For long options, margins will be blocked on Thursday and your position will be squared-off post 12 PM if it results in a negative balance.

  18. sajith says:

    I have bought one lot each of mgl call, Bata call, marico call, and pnb call expiring on 30th Aug, can I hold till expiry n sq off before expiry ..will I be charged extra from Monday, ? Playing advise,, my account balance is low

    • Faisal says:

      If you have bought options, margins will be blocked on Thursday(50% of the contract value) and your position will be squared-off post 12 PM if it results in a negative balance.

  19. Vijay says:

    I have a few call options of MGL for the August expiry. Till what date/time can I hold them before Zerodha squares off my positions.

    • Faisal says:

      If you have bought options, margins will be blocked on Thursday(50% of the contract value) and your position will be squared-off post 12 PM if it results in a negative balance.

  20. pankaj says:

    Sir What to do if i dont want physical delivery??….if i plan to close the position on last monday still i have to maintain margin???

    • Faisal says:

      As soon as you close the position, margins will be released.
      Margins will remain blocked as long as you have the position open.

  21. Hitesh says:

    I am short rcom aug call of 30 strike price since this is OTM call what will happen on day of expiry
    Do i have any physical settlement obligation.

    • Faisal says:

      If RCOM remains below 30, you will not be obligated to deliver the shares as the contract will expire worthless. However, additional margins will remain blocked in your account till expiry.

  22. Dinesh Yadav says:

    Hi, I have bought BEML 900CE at 8.5. Now it’s 2.5 premium. How much margin should I have in my account to make sure it doesn’t automatically squared off till expiry starting Monday. I will be squaring off before expiry myself

    • Faisal says:

      Since you have bought options, margins will be blocked on Thursday(50% of the contract value) and your position will be squared-off post 12 PM if it results in a negative balance.

  23. ARUN GALGALI says:

    Please provide the list of the stocks scheduled for physical delivery for August 18 expiry.

  24. Vishal says:

    I have ongc 200ce …5 lots…i can’t sell it…what will happen at expiry

    • Faisal says:

      Since you have bought options, margins will be blocked on Thursday(50% of the contract value) and your position will be squared-off post 12 PM if it results in a negative balance.

  25. SAMIR agarwal says:

    Rcom 30ce is OTM as of 24th Aug and let’s say it becomes ITM or CTM on or before 30th Aug and at the same time if Rcom goes to F&O ban on the expiry day and I don’t able to sell or squareoff my buy position due to non finder of buyer or system issue then what would happen please Claify

    • Faisal says:

      Samir, even if there is an OI ban on RCOM, you will be able to square-off. Unlikely that you will not be able to find a buyer as there will be option writers who would want to cover their short positions.
      In the unlikely event, that you are not able to square-off, you will be obligated for a physical settlement.

  26. Manjunath says:

    Helo Sir,
    I have option position of UBL 1500 CE @ 9 I buy and now it’s 6.25 ( underlaying stock at
    1395) and i getting msg from zerodha abt physical delivery so and I don’t have money of 30% If I don’t money and I don’t want Physical delivery and I want square off my option on 27 aug and expy on 30th aug so I don’t get any prbm if I m not maintain margin of 30%

    Or mandatory to take physical delivery of stock

    Y bcoz I learnt tht option buyer have right to exercise and if he don’t want means option contact becom closed and no need to maintain any margin

    • Faisal says:

      You are free to square-off your positions until expiry.
      Yes, on expiry, you have the right to exercise, if you choose not to, you will lose the premium you’ve paid.

  27. Manjunath says:

    Helo Sir,
    I have option position of UBL 1500 CE @ 9 I buy and now it’s curently 6.2
    ( underlaying stock at 1395)

    If I Failed to miantain Margin on Monday it will auto sqr off or it will continually trade till expire day or

    If I want sqr off but no buyer means what will happen

    I m not ready to take physical delivery means what will happen bcoz I m call option buyer I have right to buy but not obligation so what r consequence will occur

    • Faisal says:

      Since you have bought options, margins will be blocked on Thursday(50% of the contract value) and your position will be squared-off post 12 PM if it results in a negative balance.
      Delivery obligation will only arise if it becomes in the money(where still you have the option to exercise or not)

  28. Nirav says:

    I am long 1 lot of rpower . What wil be the status if i do not square up this august expiry

  29. Dev says:

    I hve shorted hexaware 450 pe option at 4.5 which now at at a strike price of 30
    what if the hexaware trades at 425 at expiry and my position is not squared off before expiry ?!?!?
    what will be the loss for me ???

    • Faisal says:

      Since you are short put options, you will be obligated to receive the shares in your demat on expiry. The stocks delivered will be at the buy price of 425(assuming Hexaware settles at 425 on Saturday).
      Your loss for the short option position will be intrinsic value minus premium paid (25- 4.5= 20.5)
      The P&L for the stocks delivered will depend on the price you choose to sell after it is delivered

  30. Rimi says:

    6 month bank statement have been uploaded at the time of opening account but f&o not activated till why?

  31. Umakant says:

    I have 12.5 PE for rcom..which expires tomorrow..how much balance I need to maintain…I m not able to exit even on mkt price and on limit

    • Faisal says:

      You need to maintain margins equal to 50% of the contract value before 12 PM on expiry day.
      Since, its deep out of the money, it will expire worthless. You don’t have to do anything if you are not able to exit.

      • Saba says:

        What will happen if I am not able to maintain required margin for OTM contracts & where there is no buyers to squareoff ?! Will the brokerage square of my other F&O positions to meet margin requirement? or Will you levy any penalty?!

  32. srinivasan says:

    Dear Sir,

    I have put option strike price 60- 5 lots of CG power. The underlying price is 59.10.This is august expiry. I am new to this,Please explain to me what should i do, I dont have sufficient money to take delivery

    Srinivasan

    • Faisal says:

      You need to bring in at least 50% of the contract value to continue holding the position before 12 PM on expiry day, otherwise, your position will be squared off by the RMS team.
      In case, if it isn’t squared-off, the position will be marked as ‘do not exercise’ even if it is In the money due to shortage of funds

  33. Nareshkumar says:

    I have IDBI 80CE long, no buyers and not able to sell it, Am i applicable for physical delivery.. or it will go worthless

  34. NAND KISHOR says:

    SIR I HAVE DEBIT BALANCE IN MY DEMAT -769885. I HAVE NO OPEN POSITION
    PLEASE GUIDE ME . CHECK MY ACCOUNT DETAIL USER KX 3638 MY MOBILE NO 9001796142.

    • Faisal says:

      Since you have squared-off your long option position, the physical delivery margin blocked will be reversed. Please contact our Support team who will do it for you.

  35. Prqsad says:

    Sir

    I have canfinhome Aug 330 CE..I didn’t know this physical settlement ..
    I didn’t have sufficient balance I had only 50k but when I login In today I got shocked my total account became 1.5 lacks negative …

    So 2 lacks debitd from my accnt …

    How to proceed in this

  36. Kaja says:

    What is the situation on the BANK NIFTY and NIFTY? If I only trade long on Index Options, will these restrictions impact me?

  37. Vamsi says:

    Hi,

    I have written Hexaware 440 CE at 10/-(1500 lot size) and also assume that I have 1500 shares(which have cost basis at 400) in my DP and sufficient margin for the same to hold it till expiry and get it exercised.

    Now, let us say on expiry day, stock price ends at 435 due to which my contract becomes CTM as per the rule above. So this would get exercised randomly and if this would not assigned to any buyer who has 440 CE at that point, this would become worthless. And I will still have 1500 shares with me and I can keep premium of 1500×10 with me. Am I right?

    • Faisal says:

      If the stock settles at 435, the contract will expire worthless. You will have no delivery obligations. Margins blocked will be released after Expiry

  38. S M Kadam says:

    Thoda hindi me samjhao.

  39. kanhaiya says:

    this new ASM extra margin of 4% will it be applicable to intraday index option writers also ?or it is just for positional option writers ?

  40. Sugreem says:

    What if your system (Zerodha PI) does not allow to square off any contract? Who will be held responsible? Because on two different occasions, it happened that your servers went down and it did not allow us (Retail clients) to put any trade in the system. How do you intend to handle this.

    • Zerodha Social says:

      Hey Sugreem,

      We have ensured that the necessary measures are put in place to ensure you can square off your positions on time. However, in case you aren’t able to do so, you can use Kite or call our dealer desk to square off your positions. Please note, you will be able to square off your position only if there is sufficient liquidity in the contract.

  41. Anup Kulkarni says:

    1. Does it anyway affect intraday/CO/BO positions?
    2. Where will i get VAR + ELM for the physically delivered stocks?
    3. Is zerodha margin calculator updated for all these changes in margin calculations?

    • Faisal says:

      1. Fresh positions will be blocked on the expiry week. Hence, you won’t be able to trade intraday positions.
      2. You can check the VaR + ELM margins for all stocks on the NSE website under Daily Reports.
      3. Yes, Margin calculator is updated according to the margins blocked on the terminal.

  42. Prabhu says:

    Hi,

    I have one Short Fut and Short PE (Strike Price 1160) of AjantaPharma and the share is trading around 1106. There are no sellers to square of my Short PE. What will happen in this case if I let the contracts expire?

    • Faisal says:

      If the option contract expires in the money, there will be a net-off and you will have no delivery obligation.
      If you end up closing one of the 2 contracts, you will have delivery obligation(give/ take).

  43. Sathya says:

    Hi,

    I have the following options for September expiry:

    1) ADANIPORTS18SEP340PE
    2) GODREJIND18SEP640CE
    3) HEROMOTOCO18SEP3350CE
    4) ONGC18SEP200CE
    5) KPIT18SEP340CE

    If i square off my position before expiry then I have to take any compulsory delivery of these stocks. Please let me know.

    Thanks.

  44. Raj says:

    Hi I have RCOM sept CE 32.5, 2 contract it has become worth less and not able to sell. Wat will happen to this. Do I need to take physical delivery.? What other charges I would end up in paying?

    • Faisal says:

      As long as RCOM remains below 32.5 before this expiry, there is no physical delivery obligations and the contract will expire worthless

  45. Sathya says:

    Hi Faisal,

    I have squared off my position today. Still compulsory delivery obligation is there for me?

    And moreover i have long call option which is OTM.

    Thanks

  46. Viral Mehta says:

    Hi, I have open position in futures for Oct month, and still receiving msg. Will my position be square of this week on Thursday. And I have taken this position from starting of this month.

    • Faisal says:

      Viral, are you sure you are not holding any September F&O contracts under compulsory physical delivery?
      The SMS/Email was sent to only September contract holders

  47. Raviprakash says:

    Sir I have IDBI bank 70 CE of October month..
    Now if It trades at 70+ on 24th Oct and I close my option call on Wednesday will it attract any penality or delivery obligation and in case if it expires below 70 on expiry will I be charged anything

    • Faisal says:

      If you close on Wednesday, there will be no obligation on your end.
      If its OTM and you continue to hold it, there will be no delivery obligation either

  48. Manisha Bhalotia says:

    1. I have sold call options of Just Dial oct and will buy Oct futures. Now will the margin required will be calculated individually or as a combination.
    2. There is a requirement of 50 percent margin in cash or liquid bees. Will that 50 percent will apply on the whole margin or only on exchange mandated one.

    • Faisal says:

      1. Margins requirement is calculated at a portfolio level and you will get a margin benefit for the covered call strategy. For this particular strategy, SPAN will be blocked only for one of the positions.
      2. The margin requirement(as per the schedule mentioned in the post) is on the total contract value.

      • Manisha Bhalotia says:

        For Point 2, what I meant to ask was that if the Higher Margin as per contract value is say 600000/- as per zerodha calculations but Exchange stipulated margin is say 400000/-.

        Now how much has to be in cash/liquid bees to avoid interest by Zerodha.

        a) 200000

        b) 300000

  49. Yuvaraj says:

    Hi,

    Request your feedback on following queries.
    If I hold call option and not looking for settlement
    Case 1: If my strike price is ITM. No issues of settlement. If I am right?
    Case 2: If my strike price CTM(3 price next to spot prize). Any settlement will be there?
    Case 3: my strike is ITM. No liquidity.Unable to sell till expiry What will be the implication of settlement. Can u pls explain in steps.
    1. Either this is cash or physical stock settlement ( physical delivery of shares of lot qty to my account).?
    2. What will be the implication of STT charges?
    3. What if I don’t have cash to take settlement?
    4. What can be done to stop settlement?
    5. What issue I may face, no cash but settlement is mandated?

  50. Yuvaraj says:

    Hi,

    As the physical settlement is only for 46 stocks,how this differs from other scripts.

    1. My understanding is only these 46 are physical stocks settlement (as announced from July18) and remaining are cash settlement.is it right?

    2 Will there be STT implication even in cash settlement derivatives?
    3. For instance if I hold one lot long Reliance industries call option, in ITM, illiquid till expiry. What will the apporox cash I need to have in account and what will be approx cost inclusive of all charges like brokage, STT..(Approx with current market price)?

    • Faisal says:

      1. Yes, these 46 stocks will be physically settled. The rest will be cash settled(index derivatives included).
      2. STT will be applicable on the sell side of the F&O contracts as usual. Higher STT for exercised ITM contracts. Read more here.
      3. Reliance Industries is cash settled and since you are long options, you will have to pay only the premium for the contract.

  51. Yuvaraj says:

    Hi,

    My question is regarding short call option. If it is ITM and illiquid to square off. What will happen at expiry.
    1. Whether it will not be exercised as, no stocks of lot size in my DEMAT or I may need to face short delivery
    implications.

    2. If I have cash to buy the lot qty and give delivery. What is the time period, from expiry I can buy and give delivery.

    • Faisal says:

      1. If its ITM, it will be exercised. As a short seller, you don’t have the option to ‘not exercise’. If the stocks are not available in your DEMAT, it will result in short delivery. However, you can cover this by taking a counter futures position. This will result in a net-off of the physical delivery obligation.

      2. You need to have the stocks in your demat on the day of expiry plus 2 days. So you need to buy the stocks atleast on the expiry day to give delivery without it going to auction

  52. Yuvaraj says:

    Hi,

    Regarding ITM, illiquid options, no cash to take or give delivery , in queries answered above it is stated in two ways,
    1.we can decide whether to exercise or not, if no cash.
    2. We are obligated be give or take delivery as it is ITM.
    Bit confused.

    • Faisal says:

      If you are an option buyer, you have the option of ‘do not exercise’ and we will use this option if you don’t have the funds/holdings. If you are an option seller, you don’t have this option and you are obligated to give or take delivery. This is the same reason, the margins are higher closer to expiry to cover for the delivery risk.

  53. Yuvaraj says:

    Hi,

    I like to know, whether for cash settled derivatives, is it necessary to carry higher margin towards expiry? . Since this is only cash settlement, there is no point in carrying margin for buying the lot stock.

    Pls clarify.

  54. Sandip says:

    I have Shorted MARUTI FUT and Bought equivalent qty MARUTI Stocks. What will happen on Expiry?
    Doesn I have to bring in extra margin?
    I can close Stock on any day and time but what will happen to MARUTI FUT once I sell all my stock on MARUTI on Expiry?

    • Faisal says:

      1.Margin is blocked for the Futures trade as soon as you take the trade, the position is marked to market daily. You don’t get any margin benefit on this.
      2. You can exit both your stocks anytime and the futures on or before expiry at will. The position will be exposed without any hedge.

  55. prakhar says:

    Will zerodha notify me that i am holding a compusory delivery stock derivative postion as the list are updated and suppose for some reason i do not know that i am hoding compusory delivery stock derivative position.Or is there any other way to know the same in real time wheather any of my derivative positions falls under phsical settlement list.
    Thanks

  56. Kanhaiya says:

    A) If I am carrying 1 lot Short Future & don’t have any shares in my D-Mat A/c on prior trading day immediate before expiry day (i.e on E-1) and I have fulfilled the stipulated margin in Cash i.e 80% of contract value or [Span + Exposure] whichever is higher as well:
    Q1. Do Risk Management Team will square-off my position on Expiry day only Or they have choice to square-off on E-1 day?
    Q2. If choice to square-off only on expiry day then at what time?

    B) If I am carrying 1 lot Short Future & pledged equal number of shares to Zerodha & I have fulfilled the stipulated margin in Cash i.e 80% of contract value or [Span + Exposure] whichever is higher.
    Question : What will happen on expiry day if I don’t do anything from my end?

    • Faisal says:

      1. The position will be squared-off on expiry day even if you have the margin but you have a give delivery obligation.
      2. The position will be squared-off post 12 PM on the expiry day.

      3. Your position will be let to expire and settled physically. You need to send an unpledge request on the expiry day(before 4 PM) and the shares will be unpledged and shares will be debited from your account to meet the obligation.

  57. Kans says:

    List of Stocks in Compulsory physical settlement will keep growing in future. So to curtail the risk & to have better literacy well in advance on this topic;
    1) Do F&O Margin calculator for Stocks in the list of compulsory physical settlement (for last 4 days from E-4 till Expiry day) is available / is there any plan to make it?
    2) Scenario builder for various F&O strategies: % of Margin / Funds in trading A/c / # of shares requirement in D-mat with timeline will help a lot.
    3) Do margin benefit available for covered/protective/spread positions? (for last 4 days from E-4 till Expiry day)

    • Faisal says:

      1. The F&O margin calculator displays the updated margin requirements(including physical delivery margin) for the position.
      2. You can build strategies on the margin calculator page itself(margin benefits, premium received are displayed too).
      3. Yes, you will get the margin benefit as per SPAN but since the additional physical delivery margin is added to the exposure margin, your overall margin for the position(s) will still be high.

  58. Sunny says:

    Sir I have 5 lots of MRPL CE 90 expiry 29-Nov-2018.. Can I square off it on Monday i.e. on 26 Nov.. or have to required fund for physical settlement.. also I didn’t know much about physical settlement i.e. how much amount should be required etc.

  59. Raja says:

    I have 1 lot of NHPC 30 CE call option. Now the spot price is 26. I just got an sms regarding physical delivery and sufficient margins to be maintained.
    Iam not able to sell it as there are no buyers.
    What will happen in this scenario.

    If it closes below 30 on the expiry day, it is OTM right. And it also became worthless as there are no buyers.

    Pls let me know what needs to be done

  60. Rohit says:

    I have 3 lots of Hexaware 340 CE November around 4. Suggest me…

    • Faisal says:

      As long as Hexaware remains below 340, there will be no physical delivery obligation.
      Physical delivery margins will remain blocked as long as you continue to hold the position.

  61. Antony says:

    I have 4 long put options 57.5PE of IDBI bank. What is going to happen to happen to my position on Monday. How much margins do I need to maintain in my account and what is VaR +Elm of IDBI?

    • Faisal says:

      As long as IDBI remains above 57.5, there will be no physical delivery obligation.
      Physical delivery margins will remain blocked as long as you continue to hold the position.
      You can find VaR+ELM of all stocks here. Margin block will be 20%, 40%, 60% and 80% of this as mentioned above.

  62. Karan says:

    Hello Sir!
    Can you plz answer as to what is Zerodha’s position regarding trading in the scripts liable to physical settlement. Till last month , trading was stopped in them from Monday itself (till expiry on thrusday). But this month we are able to trade in them today as well. So what is Zerodha’s current positon regarding that. Can we trade this time uptill Thrusday or today or what? (So I can take my positions accordingly.)
    Thanx in advance.

    • Faisal says:

      We have been allowing fresh positions till Wednesday in physically settled contracts since October expiry. However, additional physical delivery margin as mentioned in the post will be applicable.

  63. Dhaval Shah says:

    Hello,
    I have bought yes bank 130pe at 2 Rs. of Dec series. Can I carry forward till Dec Expiry. I have full balance I.e. Lot 1750*2=3500. So can I carry forward till Dec Expiry..??

  64. Abhay says:

    Hi, I had sold YESBANK18NOV180PE (sold 18Nov put at strike of Rs.180). The option closed yesterday – so I should be delivered the 1750 shares of Yes Bank and charged Rs. 180*1750. Instead my account has been settled in cash.
    Can you explain why it was cash settled? I have maintained adequate cash to accept delivery of the shares. Yes Bank is one of the mandatory cash settled counters and you sent me e-mail to maintain cash balance in account – which i did.
    Thanks.

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