What is devolvement for commodity option and how does it work?

What is devolvement at TradeJini?

Devolvement at TradeJini refers to the process of converting an in-the-money (ITM) commodity options contract into an underlying futures contract of the same asset. When a commodity option is ITM, it is devolved into the underlying futures contract. The strike price of the devolved options contract is determined by the buy average for taking delivery or the sell average for giving delivery of the futures contract.

What happens if I hold an ITM option at TradeJini, but there aren’t sufficient margins?

If your ITM option position doesn’t have enough margins in your TradeJini account to hold until expiry, the position will be squared off after 9 PM on the expiry day. However, if there are sufficient margins in your trading account and you hold an ITM option contract, it will be devolved into the underlying futures contract from the very next day after expiry.

What occurs on the options contract expiry date at TradeJini?

On the options contract expiry date, all open ITM options contracts will be devolved into futures. The exchange blocks a margin equivalent to 25% of the futures margin required to hold the ITM option contract 2 days before expiry, 50% 1 day before expiry, and 100% for devolvement. Failure to have the required margin in the trading account may result in a square-off of open positions at TradeJini’s discretion. If an ITM options trade cannot be matched with a counterparty, it will be cash-settled