What is TradeJini's policy on the physical settlement of equity derivatives on expiry? – RMS

TradeJini’s Policy on Physical Settlement of Equity Derivatives

For Buy Side:

Clients engaging in BUY side transactions must ensure that the full amount required for taking delivery is maintained in their account. The total contract value should be available in their balance to facilitate a smooth transaction.

For Sell Side:

Clients involved in SELL side transactions should have the total quantity of the contract available in their demat account to fulfill the delivery obligation.

Understanding Physical Delivery – Derivative Contracts

SEBI, in a recent circular, has made it mandatory to physically settle all open positions in derivative contracts. Starting from the October 2019 expiry, all stock F&O contracts are subject to compulsory physical settlement. The settlement obligations are computed based on the following criteria:

Unexpired Futures:

Long futures result in a buy (security receivable) position.

Short futures result in a sell (security deliverable) position.

In-the-money Call Options:

Long call options exercised lead to a buy (security receivable) position.

Short call options assigned lead to a sell (security deliverable) position.

In-the-money Put Options:

Long put options exercised result in a sell (security deliverable) position.

Short put options assigned result in a buy (security receivable) position.

The quantity to be delivered/received is equivalent to the market lot multiplied by the number of contracts, leading to physical settlement.

For more details on the settlement procedure prescribed by the exchange, please click here.

To know more, please connect with our support team on 080-40204020 or write to us at help@TradeJini.com.