I have a few clarifications regarding physical settlement. Maybe useful for other traders as well:
What happens to Nifty and other indexes. Is it cash settled? Does it require higher margin in last week?
What is the increasing margin policy? Does it increase starting Monday on expiry week (40,50,60,80), or is it applicable only on the last day?
Let’s say I am holding 1 call option of Asian Paints (600 shares) and 1 put option of Asian paints (600 shares), both CTM but not deep OTM. How many shares do I need to keep in my account for you to not square off my position? Is it 600 or 1200?
Do deep OTM options require me to maintain shares in account? Understand the need for margin but are shares needed?
If you deduct shares from my account as part of physical settlement, how much brokerage will I be charged?
Cash settled, no additional increase of margins from our side.
Last wednesday and thursday, margins will be double ie 2 times of span+ exposure.
If they are long ITM, double margins will be blocked as mentioned above. For short irrespective of moneyness ie ITM/OTM double margins will be blocked on last wednesday and thursday.
OTM short, double margins are blocked irrespective of shares in account.
Any contract getting settled in physical will be charged .5% of contract value as brokerage, if they are netted off then .1% will be charged.
It would be really helpful to have a detailed Support article/note on the margin requirements for ITM/OTM CE/PE options so that anyone can plan ahead for the expiry week.
hi siva,
what will be margin requirements for covered calls?
like if i am keeping equivalent of 1lot of shares in demat and have sold a call?
will the margin increase requirements apply here as well?
For CTM long options, the buyer has option of “DO NOT EXERCISE”. So, the market will “assign” CTM shorts randomly.
My question is, WHEN and HOW a seller be notified whether his CTM option is “assigned”
What i understood from zerodha policy, if CTM option is not assigned, shorter WILL keep the premium received and he will not have to receive/deliver the stocks; and the the buyer will forfeit his premium. Am i right?
@VenuMadhav@siva suppose I have long put at 300 strike and short put at 260. And if scrip closes at 200 . Will I have to give delivery or both positions will be netted off.
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"
Quoted the above from zerodha’s policy on physical settlement.
Due to increased margin requirements for last 2 days of expiry, or even otherwise, it becomes difficult to know whether my funds-equivalents will be sufficient for the delivery, or the RMS team will square off my position (obviously in loss due to illiquidity) due to lack of funds.
My question is, how to make sure/ where to look in kite or console if my funds-equivalent are enough for physical delivery.
Hi @siva, I think I could not convey my query appropriately.
Assume I’ve sold an ITM put say 15 DTE and certain margin is blocked. On 3DTE I’ve 100rs in trading account shown as “available cash”. On 2DTE, margin is increased by x and I’m left with 100-x available cash. How to be certain that 100-x cash is sufficient to get delivery of the shares if my sold put expires ITM?
Few expiries back, it happened to me that as per my calculation I had enough cash in my account to get delivery of stocks for a sold ITM put. But late in the day RMS team squared off my position in substantial loss citing insufficient balance(I had raised a ticket about it and got the response). However I bought the stock equivalent to 1 lot same day from the cash market from same money I had in my account which was cited insufficient while squaring off my position by RMS team.
I’m interested as I don’t want such things in future.
, but at least it is clear enough to act upon.