Clarifications regarding Physical settlement

Dear Team,

I have a few clarifications regarding physical settlement. Maybe useful for other traders as well:

  1. What happens to Nifty and other indexes. Is it cash settled? Does it require higher margin in last week?
  2. 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?
  3. 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?
  4. Do deep OTM options require me to maintain shares in account? Understand the need for margin but are shares needed?
  5. If you deduct shares from my account as part of physical settlement, how much brokerage will I be charged?

Best Regards and Thanks.

We will put our policy in a day or two.

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.

2 Likes

Thank you Siva for the quick response. I may have grudges with a few policies :grinning:, but at least it is clear enough to act upon.

Thanks Siva!

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.

Right, will share in a day or two.

Can check the policy here.

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?

Yes, it will, it is mentioned in the post.

For CTM long options, the buyer has option of “DO NOT EXERCISE”. So, the market will “assign” CTM shorts randomly.

  1. My question is, WHEN and HOW a seller be notified whether his CTM option is “assigned”
  2. 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?

dear @siva?

Can be checked in contract note.

Right.

Thanks @siva