How does the new physical settlement of stock derivatives work?

Hi…

If I have enough funds in my trading account to hold a short call till expiry and if the same ends up as OTM(which is worthless) it will still be cash settled like before. Correct?

Lets say I hold Hexaware 400 CE and stock price is at 350 around and assume that I shorted Hexaware 400 CE at 3/-… I will get 1500 x 3 = 4500 into my account. Correct?

All these physical settlement rules are applicable only for ITM and nearest ITM calls which are vulnerable/prone to be exercised by buyers. Correct?

SEBI New margin guidelines are to come to effect from the 1st of June and will benefit hedged positions. The margin requirement for all Stock F&O contracts increases 2 days prior to expiry (Wednesday and Thursday of the expiry week) to twice of the exchange mandated SPAN + Exposure margin required.
Is this likely to continue as before? Also is there any change in physical delivery margin for ITM long options

They will remain same, if any changes to this, we will update all our clients.

Do I need to keep cash equal to the contract value as margin or margin financed by pledging MFs is sufficient?
My sold put is far OTM.

@NIlesh_Gaikwad It is mandated by exchange that for overnight F&O positions 50% of margin should compulsory come in cash and other 50% can come from collateral margin.

@ShubhS9 if i purchase stock through phsyical settlement , when would i able to sell them.
assume tomorrow is expiry so will i be able to sell them by monday

You can sell shares received from physical settlement only after they are credited to your Demat account, Delivery takes 2 working days from expiry, so you will be able to sell on Tuesday, if it is short delivery then it will take 4 working days for stocks to reach your Demat account.

But aren’t all fno contracts still cash settled so long as I remember to square them off well before expiry? Isn’t it just a matter of thinking of it all as the expiry being 4-5 days lesser than the scenario that existed earlier?

Right, Options in India are European Style Options which can only be exercised on expiry, if you square-off your position before expiry there is no obligation to physically settle.

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I am new to FNO. Can you tell me when to square off position to avoid physical settlement.

You can square-off your position anytime before market close on expiry day.

Would also suggest you to read Varsity to learn more about F&O.

What is all the margin increase before two days.

Explained in detail here.

Can I offset itm put option short by sell in same month futures on expiry day to avoid physical settlement ?

Yes you can, below are the scenarios in which net-off will happen:

TH4JQCYS_Screenshot_208

You can learn more on physical settlement here.

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I observed that the physical settlement email was sent only on 23rd June [Wednesday] this month for my short option [OTM ] position.

Is the margin requirement [For short OTM options] for physical settlement now applicable only on expiry day instead of Wednesday and Thursday (expiry day)?

Yes, the increased margin requirement for physical settlement is now applicable only on the expiry day and it is “Higher of (a) 40% of the contract value or (b) SPAN + Exposure margin prescribed by the exchange”. Refer to this thread -

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Before posting this i have read

@ShubhS9 @siva please explain the below line shared by support executive .

"If you haven’t squared off ITM options on the expiry day, as per the physical delivery policy, Call/Put options – ITM options get exercised but expire at 0 value "

My trade was HeroMoto 2750 CE buy

HeroMoto 2800 CE Sell. Closing price of Heromoto was 2830

I should be in profit.

Can you message your ticket number? Will have this checked and clarified for you.

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I have question about the same. For e.g I have bought CE of TCS of strike 3000 and on expiry the stock closes @ 3200. If i am unable to sell it due to liquidity. If I sell future @ 3200, I assume that I dont have to take delivery of stock. But, how the CE and future contract will be settled?