What is that?
What happens to in the money index options at expiry ? Will the stocks constituting the index be delivered?
No, index options will still be cash settled.
Only Stock options will be physically settled.
,@nithin…to add to my previous post… with nearly one million active clients on zerodha, assuming everyone contribute an avg of RS 100 towards brokerage… . Is zerodha loosing 10 crores of brokerage amount daily basis??..before 4 days of expiry…i am saying minimum brokerage on last four days in stock options…it might be very heavy on last four days…as most retail traders turn to options on last four days…
Or the best thing why can’t you start a. Petition just like you did for STT.
BIG PLAYERS as SEBI said… They will play on any day … they don’t require expiry day…for stock options…
I wish 1 million active clients were trading F&O. 
1 million is total number of people who have traded once a year last year. Majority of them are equity investors for whom we charge no brokerage. Daily F&O traders are around 50,000, which will be around 10 to 15% of the overall market size, which is sub 500,000 active F&O traders in the country. (My guess).
Btw, why will Zerodha lose brokerage? Brokerage is what we earn as a business right?
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Yes Nithin…thanks for.your response…but sub 50000 and assume these 50000 contribute RS 100 on stock options everyday, that turns to be 50 lakhs on a daily basis…so by blocking to trade to buy stock options on last four days…it’s a loss on brokerage front correct?
Bottom line… people having muscle power, can take/manipulate prices on any day …
Let’s hope this rule of not allowing to trade stock options on last four days…goes away…and bring retail traders active again
This rule has not been created by sebi or nse.
This rule has been created by big brokers.
Sebi and nse have no role to play in scrapping of this rule.
Hi .ya it’s the both the Physical delivery rule which was created by SEBI , and the broker too
Inspite of physical delivery, they could have allowed new trading till wednesday (if they wanted to be extra safe).
Nse or sebi has no issues. They are not asking for more margin during the last 4 days. They have not asked to disallow creation of new positions in the last week.
Brokers have decided that they will ask for more margin in d last week and also disable trading for clients.
Brokers themselves are free to create new positions in the last week without any additional margin.
[quote=“Kesava_Reddy, post:66, topic:52264”]
Yes Nithin…thanks for.your response…but sub 50000 and assume these 50000 contribute RS 100 on stock options everyday, that turns to be 50 lakhs on a daily basis…so by blocking to trade to buy stock options on last four days…it’s a loss on brokerage front correct?
[/quote] @anp
Yes, but we have to let it go to safeguard clients interest and not to take excess risk by allowing to trade in them. Imagine if some put option is trading at 10 paisa with lot size of 1000, it costs 100 rupees to buy . Imagine one client with 10k in account can buy 100 lots. On last day last hour if it turned ITM and there is no counter party to exit? so now we have to deliver 1 lakh shares of that contract. Broker has to bare all the obligations arising out of it. So, one single client with 10k rupees can put lot of stress on broker, imagine if 100 clients did the same or 1000 clients. There are good chances in these kind of scenarios small brokers can be down and out with all the clients money. A big broker can cause a systemic risk if they don’t manage things properly. I agree with what you are trying to say but we have no other choice for now.
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There are good chances in these kind of scenarios broker can be down and out with all the clients money.
[/quote]
@nithin
Why would broker be out with other clients money also . Isn’t clients money in trading account liability for broker .
If broker don’t manage risk properly, for example: if client initiates a big position with high leverage and suddenly it moved against him and broker fails to close the position, all the losses should be made good by broker at end of day. Now as clients don’t have that money, this will be deducted from brokers own. If broker is short from his own then? That is the reason why risk management is core to the entire system.Though from investor protection fund sebi guarantees upto 25 lakhs per client in case of member default/expelled. There are many small brokers who are out of the system, defaulted during 2008 crisis.
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If I’m not wrong then by this September all F&O scrips will come under the compulsory physical delivery syatem. So will Zerodha block new F&O positions for all scrips in last 4 days of expiry?
Allow us to take new f&o position of compulsory physical delivery scrips in last 4 days of expiry.
Yes,but we can’t take excess risk by allowing to trade in them. Imagine if some put option is trading at 10 paisa with lot size of 1000, it costs 100 rupees to buy . Imagine one client with 10k in account can buy 100 lots. On last day last hour if it turned ITM and there is no counter party to exit? so now we have to deliver 1 lakh shares of that contract. Broker has to bare all the obligations arising out of it. So, one single client with 10k rupees can put lot of stress on broker, imagine if 100 clients did the same or 1000 clients. There are good chances in these kind of scenarios small brokers can be down and out with all the clients money. A big broker can cause a systemic risk if they don’t manage things properly. I agree with what you are trying to say but we have no other choice for now.
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So how about not removing the additional margins but allowing fresh positions?
The extra 40-100% margins will cover the kind of risks that you mentioned above.
How about you move the deadline from monday to wednesday?
On wednesday morning itself make the margins 100%.
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IS ALL THE FNO STOCKS come into physical settlement?
Yes.
@Bhuvan
Hello,
For say, I’ve 3000 shares of SBI (equal to f&o lot size) in my holding at avg cost 200 rs. For hedging purpose, I sold a call option of 210 at the premium of 2 rs. On the expiry it the CMP of SBI is 220 and I chose to settle it by delivering all shares.
Please explain to me the P&L calculation for this scenario (raw calculation will also work).
Upon expiry you will be making Rs. 10 profit on shares as you will be delivering them at 210, and will also keep the Rs. 2 premium received. So your net profit will be Rs. 12 (minus brokerage and other charges).