Settlement of equity option

Hi I have doubt please help to solve it.

  • If I have in the money call option open position on expiry day and I do not have enough margin to settlet it physical delivery then in this case what will happen?.
  • If I have put in the money open position on expiry day and I dont have enough share for physical settlement and also dont have margin for Auction trade then what will happen?

In such scenario, your account will result in debit balance, You are required to bring in funds if your account results in a debit balance after physical delivery failing which the delivered shares will be liquidated to make good of the debit balance and you will so be charged interest at 0.05% per day.

This will result in Short Delivery, and there will be penalties charged accordingly. You can learn more about Short Delivery here.

You can learn more about Physical Settlement policy here.

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Thanks, I am using zerodha platform is there any RMS for auto close position?

As margin requirements increase for Stock F&O during expiry, if you do not have adequate funds to hold your position and after getting margin call if you do not bring required funds, RMS will square-off your position, but sometimes due to lack of liquidity or volatility even RMS might not be able to square-off, so onus is on client to monitor the positions.

While buying stock option.there is no margin required, Only buying cost. .IF it expires ITM ,we have to take delivery of shares with huge fund.So actually when such funds is required to bring in??

Even for Long Option positions, exchange starts blocking physical delivery margins for ITM Options in phases from prior Friday of the expiry week.

You can learn more on this here.

To take physical delivery, you should make adequate funds available by expiry day.

Thanks for quick response