what happens to compulsory delivery in case of hedged positions? do we need additional margins or we can let the positions expire?
This is the list of scenarios in which net-off happens
The margin requirement for all Stock F&O contracts will be increased 2 days prior to expiry (Wednesday and Thursday of the expiry week) to twice of the exchange mandated SPAN + Exposure margin required.
You can read more about Zerodh’s policy reg. physical settlement here.
In case you trade spreads and scenario arises where one of your position is ITM on expiry, I’ve explained here what happens in that case Physical delivery otm - #12 by ShubhS9
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thanks.
What I could deduce from the info available, it’s not advisable to keep spread like hedged positions in last week to expiry, unless both legs are fair OTM. Reasons are STT (still applicable for notional delivery in netted-off positions), brokerage (0.1% of contract value even in netted-off positions/ 500 rs for a usual contract value of 5lac in an expected profit of 2-3-4 thousands); AND delivery obligations if spot expires within your spread: the most dangerous of all.
With the new margin norms for hedged derivatives, the margin required for a hedged position has drastically reduced.
However, for stock options with physical delivery, how does the margin change when one of the positions become ITM. Is reduced margin still effective? Are hedged stock options physically settled.
Pls elaborate, conditions in which physical settlement of stock options do not arise.
List of scenarios for netoffs appears incorrect for scenario 3. If one is holding long ITM Call. The net off should happen on short ITM call or long ITM put option. The scenario 3 suggests the opposite.