In the case of an option contract, all long positions open on strike prices in the money are automatically exercised on the day of expiration and are randomly assigned on short positions under option contracts with the same series. The final exercise is carried out automatically by NSCCL for all long in-the-money open positions in the option contract at the end of the month, on the expiry date of the option contract. The exercise clearing price is the closing price of the underlying (index or security) on the expiry date of the option contract. The compensatory value is the difference between the exercise price and the final settlement price of the option contract concerned. With respect to call options, the clearing value chosen by a buyer is the difference between the final settlement price and the exercise price for each unit of the underlying negotiated option contract, whereas for the put options, it is the difference between the exercise price and the final settlement price for each unit of the underlying negotiated by the option contract. The settlement of the exercise of the option is currently done in cash and not by delivery of securities. . If a futures contract is not traded one day or during the last half hour, a “theoretical settlement price” is calculated according to the following formula: 2. SEBI has also established a “periodic monitoring and penalty mechanism for the short-term recording and non-perception of customer margins” in the derivatives segment by issuing the following flyers: 4.2. Penalty structure for the short/non-perception of margins and false/false statements of customer margin collection by TMs/CMs: Rajesh Kumar D General Manager Market Intermedia Regulation and Supervision Department 2.2. SEBI/HO/CDMRD/DRMP/CIR/2016/80 of September 07, 2016 addressed to all national commodity derivatives exchanges and topic: Recovery and margin notification by trading member (TM) /Clearing Member (CM) in the cash option Volatility segment – Pricing Strategies Advanced Trading What is implied volatility of options and the effect of these options on options? 4. In the liquidity sector, the VaR margin is recovered in advance by the Clearing Corporation (CC) by a member/compensator member, adjusting to the available liquid assets of TM/CM at the time of trading.
However, the quantum, shape and type of input of the customer`s edge are left to the discretion of TM/CM. In order to align and streamline the risk management framework, both in the treasury and derivatives sectors, with respect to the recovery of client margins and the reporting of short and non-collection margins, the following guidelines are issued: the amount of the premium and the amount of the premium are charged for the calculation of the net premium or the amount of the debt for each client for each option contract. Exercise Process The period during which an option can be exercised depends on the style of the option. In the case of NSEs, index options and options are European in type, i.e. options are only subject to an automatic exercise on the day of expiration if they are in the money. Automatic exercise means that all options in the money are exercised by NSCCL on the expiry date of the contract. The buyer of these options does not have to make an exercise notification in such cases. NSCCL offers institutions/Foreign Institutional Investors (FIIs)/Mutual Funds, etc., a special opportunity to trade on each TM that can be billed and settled by their own CM. These institutions are referred to as “persons responsible for detention” (CPs).