Do Gold Futures and Options on Zerodha have compulsory physical delivery at expiry?

Commodities
1

I want to confirm whether Gold Futures and Options traded on Zerodha are subject to mandatory physical settlement if positions are held till expiry. Please clarify if there is any option for cash settlement or if all contracts compulsorily result in physical delivery. Also, does this apply to both buyers and sellers, and are there any exceptions?

2

Hi @Patel_6

Please refer to the above post, where we explained our MCX contract settlement policy.

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3

Thanks.

4

I came across a statement in Zerodha saying that a short ITM option will devolve into a futures position only if the buyer exercises the option, otherwise it gets cash settled if the buyer selects DNE. Since options are traded anonymously on the exchange, I want to understand who this buyer is, how the exercise decision is made, and whether a seller has any visibility or control over this process. Also, is the exercise decision random or system-driven at the exchange level?

5

Hi,

By default the ITM options are devolved to futures (exercise). Only when buyer explicitly asks for DNE it’s cash settled.

Note: if DNE is opted buyer will loose his entire premium. So buyer asking for DNE is rare.

Exchange does not disclose the buyer details.
Seller does not have visibility or control over it.

If DNE is opted it’s assigned to it’s counter seller by the exchange.

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6

Could you perhaps provide a example illustrating this?

7

For example you had bought crude 5000 ce at Rs. 10 and on option expiry crudeoil settlement price is 5005.

Generally Rs. 5 will be cash settled settled, and you will get a devolved future long position with average 5005.

In case you opt for DNE, you will loose that Rs. 5 and devovement also will not happen.

To know more, you can please refer Chapter 4, Clause no 5.2 from master circular from MCX here

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