InvestorQ : I understand that all futures and options will move to compulsory delivery settlement from the October series. What does that mean for me as an F&O trader?
Deepa Salunkhe made post

I understand that all futures and options will move to compulsory delivery settlement from the October series. What does that mean for me as an F&O trader?

Answer
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Anamika Sodhani answered.
12 months ago


Let me clarify that only stock futures and stock options that are left to expiry will translate into compulsory delivery. This rule does not apply to any of the index futures or index options but only to stock futures and options. If you have an option position, you have 3 options.

· You can choose to square off the position with a reverse transaction, any time before the beginning of the expiry week. This will not entail any delivery.

· You can choose to square off the position with a reverse transaction, in the last week before the actual expiry. This will not result in delivery but you have to pay higher margins in the expiry week which will progressively go up from Monday.

· You can just leave the position to expiry on the expiry date. In this case, all long and short futures position on individual stocks will be treated as actual delivery. In case of options (calls and puts), the OTM options will not result in delivery. All ITM options will necessarily result in delivery. However, the near to money or close to money options the broker will have the discretion whether they want to treat as delivery or square off. Even in such cases, the higher delivery STT charges will be applicable.