Future square off not done on expiry

General
1

Dear Team,

I sold december bank nifty future at 43255 by oversight I forgot to buy (square off).

Could someone please guide me what will be the impact.

Thanks for your prompt revert.

Regards,

2

Index fno is cash settled afaik…

3

thank you but i didn’t get you what it mean.
will there any penalty and how much approx.
December future bank nifty i sold at 43255 and it closed at 43255.

How much maximum penalty will applicable

4

No penalties because it is cash settled. Since, your buy and sell price is the same - you will only be charged the regulatory taxes.

5

Hello Brother,

I only sold, but by oversight i forgot to close (buy) before expiry time and that is my worry.

Will it show in open position tomorrow in my account and allow me to square off ?

If yes, tomorrow how i can buy december expiry future.

Need your guidance.

Thanks you always.

Regards,

6

Nothing will happen. Just calm down… calm down….

7

Yours noted bro, and will wait and see.

I hope, there will not be much charges for my this mistake of forgetting to square off on expiry day. Ofcourse i will not repeat this mistake.

Thanks you.

8

If you have missed closing your existing F&O positions, the same will be settled for the settlement price and the position will be closed in exchange. All the index F&O will be cash-settled.

It’s not a mistake anyways. You can choose not to square off your F&O positions as well. So chill.

9

That’s great.
Happy knowing this which make me feel good.
Thank you all members here.

1 Like
10

What is exactly cash settlement in Index? (Nifty or bank nifty)
Suppose, I do not close my short P.E bank nifty position, then it will be cash settled. But what does cash settlement mean in case of bank nifty and nifty? What will be shown in my holdings? Bank Nifty will be shown in holdings? How to sell it?

@ShubhS9

11

Hey Hi.

Derivatives(F&O) themself doesn’t have any value, they derive its value from their underlying assets. If you take a NIFTY F&O contract, they derive its value from NIFTY 50, likewise for other F&O contracts.

All derivative contracts have an expiry date. On the expiry, those contracts will be settled in exchange and from the next day onwards they won’t exist. How does the contract settle? The answer is based on the underlying settlement price.

There are two types of settlement

  • Cash settlement(For index F&O)

  • Physical settlement(For Stock F&O) You can read more about the physical settlement here.

For stocks F&O on the expiry, you would have to take physical delivery of the underlying. Example: Let’s say you have short stock PE expired In The Money(ITM).

Now as per the obligation, you are required to take delivery of the underlying asset, whereas if you have short index PE(ITM) just the difference between the Strike - Settlement price will be debited from your trading account. In this case, your index short ITM PE is getting settled in cash.

F&O is an interesting topic and you should learn from basics. Go through this Varsity Option theory module that explains everything about options and you can refer to the next module which is options strategies.

12

Cash Settlement (opposite of Physical Settlement) simply means that whatever is left will be settled in your trading account ledger.

Let’s say you shorted PE at the price of 10 on Wednesday (50 qty). At the end of the day, you received Rs. 500 (i.e. 50 qty x 10 price) in your trading account ledger on Wednesday.

On Thursday expiry, if you do not square off the open position, and this PE is expired ITM at the price of 2. It will be settled at Exchange by debiting Rs. 100 (50 qty x 2) from your ledger balance.

This implies that you retained the profit of Rs. 400 (i.e. + Rs. 500 on Wednesday - Rs. 100 on Thursday).

If it is expired at OTM (price 0), then you get to keep the whole Rs. 500 premium as profit from Wednesday. There won’t be any position after Expiry.