What are the Natural gas commodity delivery rules for MCX?
Suppose I forgot to close my CE and PE position, what are the rules? Can someone please explain?
1 Like
@Jack_R When commodity options are In the Money (ITM), they are devolved into the underlying futures contract.
> If the Options Are Out of the Money (OTM): The options expire worthless, and no action is required.
No charges or penalties apply, and you lose the premium paid in OTM.
> If the Options Are In the Money (ITM): ITM options convert (devolve) into futures contracts.
When commodity options are In the Money (ITM), they are devolved into the underlying futures contract. The strike price of the devolved options contract is the buy average for take delivery or the sell average for give delivery of the futures contract.
The exchange blocks a margin equivalent to 25% of the futures margin required to hold the ITM option contract 2 days before expiry and 50% of the futures margin 1 day before expiry, and 100% of the futures margin for devolvement. Failing to produce the margin in the trading account can result in a square-off of open positions at Zerodha’s discretion. If the ITM options trade cannot be matched with a counterparty, it will be cash-settled.
Can refer here
What is devolvement for commodity option and how does it work?
1 Like