Hey, Currently I am holding 12 units of Crudeoilm SEP 6300 P.E., which are now deep ITM. The current price of Crudeoilm is around- 5500. The expiry of the option contract is 17 September, let’s assume I want to let it expire ITM & let it devolve into futures contract. Then can someone tell me how much Margin may I need to keep in my account to successfully transform the option contract into futures contract?
Kindly guide me about the margin requirement that I may need to maintain to successfully continue the devolvement into futures contract?
Here is the image of the current Crudeoilm SEP 6300 P.E. position here-
To devolve an option to a futures position, you need to have enough funds to cover the margin for the corresponding futures contract(In your case CRUDEOILM future).
Currently, the margin required for a CRUDEOILM futures contract is around 20,000.
On the option expiry day, there is an additional 15% tender margin of the contract value, which is approximately 8,500.
So, in total, you need to have about 28,500(for 1 lot) to cover all margin requirements.
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Thanks for the reply.
I have another question- here my buy value (margin) for this Crudeoilm 6300 P.E. is- 313.90x12 unit(120 barrels) = 37668 -/.
When I will transform this option contracts to equivalent quantity of future contracts. What will happen to this 37668 rupees?
Will this 37668 rupees erode? or Do I get this 37668 back, when I will maintain the sufficient margin to devolve the option contracts into futures contract.
You will get it back depending upon the intrinsic value.
On the expiry day, if the closing price of CRUDEOILM fut is 5600.
The intrinsic value will be 6300-5600=700.
So 700*120=84,000 will be cash-settled.
The closing price(5600) will be the average price for the devolved future contract.
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