Do Not Exercise’ (DNE) facility,
What happens I have hedge position and one leg expires ITM and other leg expires OTM? @ShubhS9
From what I understand, Hedged position and net-off are 2 different things.
If you have one leg ITM, it will be exercised, and there will be delivery obligation.
For you to net-off, you need another ITM leg that is opposite in nature.
Eg. if ITM is long CE, then to net-off you need another ITM leg that is long PE or short CE. Also, a short Futures contract will do and all for the same expiry.
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For net-off of physical settlement obligation, both legs should expire ITM. If one expires OTM and another ITM, th you will have to give/take delivery for position that is ITM.
Starting from this expiry exchanges have introduced concept of net-settlement across cash segment and F&O segment.
For example: If you have a 1 lot (250 quantity) short futures position in Reliance, you’re required to deliver 250 shares upon expiry. If you don’t hold sufficient shares in your holdings this will result in a short delivery and subsequent auction penalty.
Under the net settlement framework, if you have an open buy position of 250 shares of Reliance in the cash segment, the obligation to give delivery of shares in the F&O segment will be netted-off against this.
Have explained about this in detail here: Net settlement of trades across cash segment and F&O segment upon expiry of stock derivatives
Also, following the introduction of net-settlement, exchanges have discontinued Do Not Exercise facility.
does nifty, bank nifty option writers also have to exit their position before expiry?
Index options are cash settled. There’s no concept of physical delivery for them.