Nifty future options - expiry and settlment

General
1

Are Nifty future options cash settled on expiry (last Thursday)?

If yes, it is fair to say that there is no early assignment risk before expiry like US equity options, correct?

2

Yep, all options in India are cash settled and all of them are European (which means that they can be exercised only on the expiry day).

3

Thanks @Nithin

4

Due to recent changes in SEBI policy of Trading Futures & Options, I had few questions with regards to Margin in Options :

  1. How much Margin is required if I am long on Call Options on Index during the last week of expiry? Also how much margin will be required in First,s Second and third week of expiry as well? After the circular, will it still be the same or will it change. The written material that I received via email is not helping me clear this doubt.
  2. How much Margin is required if I am long on Put Options on Index during the last week of expiry? Also how much margin will be required in First,s Second and third week of expiry as well?
  3. Will we still get the Margin Benefits if we hedge our trade? For Eg : Long on Index Futures and Long on Index Put Option (ATM)?

A detailed explanation with an example will help. Thanks.

5

Can check here, it is updated according to all recent changes.

6

Okay. But still my doubts stands to be not clarified. An example would help. Just looking at the F&O Margin Calculation will not help. I need to understand it thoroughly.

7

I presume you are referring to compulsory physical delivery of the 46 Equity derivative contracts?

1 & 2.Long options will attract a margin block of 20, 40, 60 and 80% of the VaR +ELM margins of that stock. For example, RCOM has a VaR+ELM of 23.22%. On E-4 day, the delivery margin will be 20% of the VaR+ELM which is 4.64% of the contract value. If you have RCOM 17.5 CE, you will be required to have Rs 22,755 (20% * 23.22%(VaR+ELM) * 28000(lot size * 17.5(Strike price)).
There will be no margin block in the preceding weeks. The margin block is applicable only 4 days before expiry.

3.While you will continue to receive the margin benefit by a reduction in the SPAN margin, there will be no benefit in the physical delivery margin charged for the long option contract

You can read our policy on the same here

Since your queries is just about Nifty F&O, there are no margins for long options other than the option premium paid while entering the contract