Yeah, these will be applicable only if held till end of expiry.
If any option on expiry has more STT than intrinsic value, the broker himself markets it as let it lapse. Nothing for you to do.
Here is the link.
Unlike the STT issue, the broker here will be in control of things. So the onus will be on broker to educate clients to square off if they don’t intend to take or give delivery. It will be similar to physical delivery contracts on commodities, has worked okay until now.
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Risk is a Risk even if u held anything fr 1sec in derivatives market! It is not a question of beforeexpiry/afterexpiry. they r discussing mandatory physical settlement fr stock derivatives.
SEBI wants to curb blind risk taking by retailers & it sees more risk is present in stock derivatives compared to index derivatives. Remember, on Aug 10th so called heavyweight ICICICBank had crashed more than 5% in cash market. Just think abt wht wud hv hapnd if it had perculated to its futures with 2750 as lot size, even fr few seconds! Also, many of the pharma stocks which r in F&O are having field day very often with min 5% move.
Yes, i believe one need to hv demat to trade in stock derivatives too frm now onwards & it becomes obvious as SLB comes into picture!
Alternatively, large traders could either roll over short positions or perhaps, short the mid month directly. Maybe this can increase liquidity in mid/far month contracts.
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This will definitely open up new strategies for Investors and Traders, it would also be great if NSE introduced LEAPS options for Stocks.
Nithin, this move might help in SLB and it might also restrict the Big players to move the market in one direction till expiry. However will this actually reduce the FNO volumes, because people might not hold till expiry but trading will still happen. In fact volumes might only increase cause the big players might have multiple entries and exits now as they wont be holding positions till expiry.
It’s good move for retail investor to catch the trend, most of traders would have let the contract settled through exchange on expiry day, once this rule implements the majority of them will cover the position rather taking them into delivery. Again it’s complicated for both client & brokers. Brokers have to ensure before expiring all positions need to be square off or else it will be marked as delivery.
Initiality it will be complicated slowly slowly people will be used to it like MCX segment.
But sebi shd take retailers concern into its account
It may lead to big losses for small investors
I dont think to tell close positions before expiry, SEBI has called SMAC meeting on monday.
I believe, anyone trading in stock derivatives has to hv lot size equal quantity in demat on OWN or through SLB mechanism BORROW equal quantity into demat before trading. After tht do whatever, nothing matters.
Once SLB mechanism comes into picture, everyone’s Credit worthiness comes into picture. Automatically everyone’s Networth becomes evident!!!
So any retail trader wants to trade in stock derivatives can show their Networth in kyc What happens next is left to everyone’s guess!!!
Lets hope my khayali pulav remains khayal only!
Anyway, kudos to Zerodha which is strategically well placed in SLB on time to collect all the Hurricane water🏄
What u mean by net worth in kYC ?
A disaster in making, in guise of reducing risk for retail investors , SEBI is going to take away shine from the Derivative markets, If SEBI has genuine interest let them make FNO 1Lot size fixed to 100 shares.
If this becomes a reality, it would be an awesome for a retail investor. Looking forward to it.
It is too early to say anything, but if I were to guess, it will be most beneficial for retail traders. A small trader can enter and exit derivative contract at will.
Have you seen the last 1 hour spikes in market on expiry day? One of the reasons it is happening could be that big traders continuously short/go long on derivative contracts to move the markets to certain levels. Today they don’t have to worry about covering it back before market close. If this comes through, they would have to or give/take delivery. Many other benefits like this.
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@zerodhaonline @Nithin0dha now short straddle and short strangle will not have that much importance as option put and call sold for straddle or strangle have to buy back… am I right…
Please clarify I am confused…
Firstly, this is still like a discussion paper. There is not guarantee that it will see light of day. If it does, all option strategies will have to be squared off in the market before market closing on expiry. So yeah it might mean a little lesser yield on the trade. Shouldn’t matter much.
You are right , but my view was based on Banning of P-Notes and listing of SGX Nifty in Sinagapore,
Government done the right thing banning P-Notes, but FIIs found alternate route to trade in SGX Nifty
Indian Bourses made a mistake allowing SGX Nifty in Sinagapore, Now , to damage further SEBI is going to change the derivative settlement. In my opinion all the FIIS will shift to SGX Singapore there FIIs have timing advantage also.
I was trading commodity futures on NCDX, making good money, then suddenly Government changed the rules , FIIs left and see the results, and what happened to NCDX. i too left trading in commodities.
To add further here is the link
Thanks… now if you don’t mind i want to ask below… please do not reply if you think so.
While let the strategy expire as it is if it works … broker donot get benefitted because there is no buying transaction.
You have supported considering there will be a square off of this type of strategy…
If earning money was the driving reason behind Zerodha or everything I do personally, hmm… we would be just like another broker :). Btw, there is a brokerage charged on exercised options, so this wouldn’t make any difference to us.
I have been a trader and I know different ways in which derivatives can be misused by people with deep pockets. Anything that can even out the playing field is good for everyone.
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Almost on every exchange in the world stock derivatives (not index) are physically settled. If anything FIIs will like this even more. A lot of them take part in covered calls (writing calls on their holdings). Now they will be able to deliver on the exchange platform itself.
I think it is too early to debate on all of this. Need to see if this is actually put in play, and if yes in what way.
It’s really great that CEO is directly replying and ofcourse immediately…
Thanks again and I hope Zerodha will take and support everything considering retail investors/traders…
Thanks again…