DNE facility is available only for the CTM (Close to the Money) contracts:
For Call Options: 3 ITM options strikes immediately below the final settlement price are considered as ‘CTM’.
For Put Options: 3 ITM options strikes immediately above the final settlement price are considered as ‘CTM’.
Option strikes beyond these will be physically settled. Also, only stockbrokers can use this option of DNE. If an investor has insufficient holdings or funds for settlement, the stockbroker could use the DNE facility to avoid default. This is especially useful if an option becomes due for settlement in the last few minutes of market close on expiry.
