Physical Settlement policy for Stock Options Contract

Since the introduction of the NSE Circular dated December 31st, 2018, all Options stocks have been mandated for physical settlement.

Physical settlement means if you hold a position in any Stock Options contract, at expiry, you will be required to give/take delivery of stocks. The physical settlement is restricted only to stock derivatives. Physical settlement of index options is not applicable. Index contracts are cash-settled only.

To avoid the complexity of physical settlement, it is highly recommended for a trader to square off all positions before expiry.

To mitigate these potential costs, the SAMCO RMS Policy has been updated to include the following measures:

  1. All open positions in these stocks’ contracts by the end of the business day preceding the Expiry Day will be treated as MIS positions upon the market’s opening on the Expiry Day. These positions will automatically be set for square-off.
  2. Product types MIS, CO & BO shall continue to be available without Additional margin and shall be squared off after 2:00 PM.
  3. All such outstanding positions in these physical derivative contracts of Expiry shall be considered MIS positions and will be automatically squared off after 2:00 PM.
  4. No fresh positions in NRML shall be permitted in these scrips on the expiry day for the current month. Product types MIS/BO/CO shall continue to be available and shall be squared off after 2:00 PM.
  5. No position conversion or spread orders shall be allowed in these contracts on the expiry day.
  6. Fresh position on expiry only available in MIS product type till 1:00 PM

Margin Requirement Policy for Stock Options during Physical Settlement:-

Day (Beginning of the day)Margin Requirement
For E-4 Day10% of (VAR + ELM + Adhoc Margin of Underlying Asset *Qty*Strike Price)
For E-3 Day25% of (VAR + ELM + Adhoc Margin of Underlying Asset*Qty*Strike Price)
For E-2 Day45% of (VAR + ELM + Adhoc Margin of Underlying Asset*Qty*Strike Price)
For E-1 Day70% of (VAR + ELM + Adhoc Margin of Underlying Asset*Qty*Strike Price)
Expiry Day100% of (VAR + ELM + Adhoc Margin of Underlying Asset*Qty*Strike Price)
  • Click Here to calculate the margin requirement during physical settlement period.

For those with positions in these stocks, there are two options:

Option 1 – Rollover the positions using spread contracts either manually or by the end of trading on the day prior to the Expiry Day.

Option 2 – Manually square off positions on the Expiry Day before 2 PM, considering them as MIS positions. Traders who wish to carry positions to the next month can exit these MIS positions for the current month and enter new positions in the next month’s contracts, selecting either the MIS or NRML product category based on their preference.

In the event that neither Option 1 nor Option 2 is executed, SAMCO RMS will automatically square off open positions (which are outstanding as MIS) at 2 PM on the Expiry Day.

  • Important Note: The policy may be changed at discretion of the RMS team. 

Wishing you successful trading!

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