Let us first look at a long position. If you are long (1 lot) on RIL at Rs 1250 and if the price on expiry is Rs.1290, then what happens on expiry day now?. Irrespective of the price at which it settles, delivery of shares in a quantity equivalent to the lot size will be affected in the client’s account. The trader will have to ensure that much money with his broker, failing which the broker will sell the shares and the loss if any will be debited to the defaulter.

The reverse happens in case of a short position. Instead of taking delivery, the trader has to give delivery. That means the shares equivalent of 1 lot in the above case must be already there as clear delivery in the demat account of the seller of the futures. In the absence of such shares it will be treated as short delivery and the appropriate auction losses, if any, will be debited to the trader account.

For small and retail traders, they just need to a little more careful. For example, the new system means higher margin requirements in the expiry week with the margin gradually going up to 100% by T-1 date. SEBI has already stipulated that brokers will need to collect higher margins beginning Monday, and increasing to 100% by T-1 day. So retail investors need to plan their cash flows accordingly. If you are long on futures, you are almost long on stocks in the last week. That is what you need to think. The best way for retail traders is to avoid stock futures in the last week and try and make an early rollover on or before Monday of the expiry week or try and square off positions in the previous week itself.