Relaxation in Physical Delivery Policy - Margins collected

Due to physical delivery of stocks for stock F&O contracts, the margin required to trade these contracts increases substantially before the contract expiry.

The policy on physical delivery margins has been tweaked in the following manner :

Futures and options short

Policy Margin increase day Margin amount
New Policy Expiry day (i.e. last Thursday of the month) Higher of (a) 40% of the contract value or (b) SPAN + Exposure margin prescribed by the exchange
Old Policy Last two days of expiry (i.e. last Wednesday & Thursday of the month) Two times of the SPAN + Exposure margin prescribed by the exchange


Assume you are long on 1 lot of Reliance futures and the SPAN + Exposure margin required is 1.10 lacs.

Old Policy

2.20 lacs (i.e. 2 x 1.10 lacs) will be blocked on the last Wednesday and Thursday of the month.

New Policy

Until the last Wednesday, the normal margins are collected.
On the expiry day, the margin required becomes higher of -

  1. 40% of contract value = 40% of 250 shares of 2000 each = Rs. 2 lacs
  2. Span + Exposure margin required by the exchange = Rs. 1.10 lacs

Therefore, Rs. 2 lacs will be blocked as margin on the expiry day of the contract.

Long Options

There is no change in the physical settlement margin policy for long stock options. 50% of the contract value will be blocked as physical delivery margin for ITM option contracts. There won’t be any margin block for OTM options, and the margin will kick in if the contract turns In the money.

You can check out the complete physical settlement policy on this support article.


Hi @mohitmehra ,

Thanks for the update.

Under the “New Policy”, can you please categorically define “contract value” -

  1. Is it the stock LTP on last Wednesday of the month, i.e. the previous closing?
  2. Or is this calculated and updated on realtime basis on expiry?

If it is the later, (calculated and updated on realtime basis), what will be the frequency of the change in margin blocked due to this on expiry?

The way I see it, you have introduced another variable in the form of “contract value” that keeps on changing every second on expiry day - in calculation for margin collected around expiry. At least, Span + Exposure was determined at set intervals via a file from exchange probably 4-5 times a day. But this is much more volatile.

So would appreciate clarity on that … Thanks.

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It will be based on LTP, so yeah dynamic.

Exposure is always based on LTP, so will keep changing dynamically. Also this won’t be so much volatile as you imagine, just maintaining a buffer of 5% should do in most cases and that too it will effect which has span+exposure less than 40 % stocks only.


@mohitmehra @siva-reddy Does the new policy continue to apply to OTM short options or only to ITM short? You might want to consider the suggestion of exempting far OTM short options, as margins get unnecessarily blocked on options which would anyways expire worthless.

Yes, OTM can become ITM anytime, also currently we will be blocking only max of 40% or nrml margins unlike earlier where we used to block double nrml margins. Also this will be blocked only on last thursday with no interest penalties.

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So @siva @mohitmehra will we get hedging benefits till wednesday? Like short strangle/straddle etc.

You will get full hedge benefit under the SPAN margin field for hedged positions. The additional margins will be 40% minus exchange stipulated margins (SPAN+Exposure margins).

thanks, Faisal.

If a very very far OTM short Call option is held on till the expiry day and after margin recalculation as per the new rules there is a shortfall of let’s say 10 lakh rupees and I am confident my position will not become ITM but will Zerodha’s risk team still square it off at market price seeing a Margin Shortfall has been triggered?