Hi,
I read the policy on physical settlement for stocks. It says that new long option positions are not allowed on Wednesday and Thursday of expiry week.
Does it mean that a trader will not be able to enter new long stock option positions even for hedging on last two days of expiry?
Ex. Is sell ICICIBANK 680 PE first and then buy ICICIBANK 670 PE allowed on day before expiry day?
No.
Because there is a risk if the trader exits one leg of the hedged position.
Also the margin (added physical delivery margin) shoots up increasingly for ITM options in the last 2 days of expiry.
No, you won’t be able to buy stock options on last two days of expiry, in any scenario.
If you want to hedge your position for netting off physical delivery obligation upon expiry, then you can take position in Futures.
Long Futures will net-off Short ITM Call and Long ITM Put.
While, Short Futures will net-off Long ITM call and Short ITM Put. You can check out more information here.
@ShubhS9 sir…
Suppose I have 100 maruti shares, and I short 6800 ce…cmp say 6751, near expiry it’s price is say 7200, I wish to square off my 6800 ce, but due to liquidity issue…it’s eating into my profit, so I decide to give delivery at 6800…
Do I need more margins at expiry for all this?
Charges would be 0.25% brokerage and 0.1%stt??? So in toto around 4000 rs in charges…???
Would there be any other charges?
Also, is buying back a short option allowed in last two days??
Kindly clarify sir
Thx in advance…
On the day of expiry, the margin requirements for the Short position will be 40% of the contract value or SPAN + Exposure margin, whichever is higher.
Right.
No, but if you don’t have sufficient shares in your demat account to deliver, this can lead to short delivery and a short delivery penalty will be applicable. You can learn more about short delivery here.
You can buy back the sold option. The restriction is only on opening fresh long positions in Options. Would suggest you go through this support article for a detailed explanation.
Thanks a ton sir