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There has been a recent change in the rules related to physical settlement of equity derivatives segment.In addition to the margins applicable for the F&O segment, delivery margins shall be levied on potential in-the-money long option positions four (4) trading days prior to expiry of the derivative contract that has to be settled through delivery.
Delivery margins are applicable on in-the-money long option positions as per the following schedule:
20% of Delivery margins computed on Expiry- 4 EOD (Friday)
40% of Delivery margins computed on Expiry - 3 EOD (Monday)
60% of Delivery margins computed on Expiry - 2 EOD (Tuesday)
80% of Delivery margins computed on Expiry - 1 EOD (Wednesday)
To avoid shortages, delivery margins would be applicable from Friday morning itself, as compared to the exchange's timing of Friday EOD. The clients are advised to add funds on Friday itself before 2.30 PM to avoid any penalties imposed by the RMS team. Since margins are an upfront requirement, positions would be reduced to the extent of shortage values in case of an overall margin shortage
No fresh positions would be allowed starting Friday (Expiry-4 days) on all the option contracts with the current expiry, the underlyings of which would be settled physically. This rule applies to all further expiries as well.
As per Upstox policy and the previous circulars sent under the subject line:"Revision of settlement mechanism in Equity Derivatives segment,"
Thus, all the open positions will be squared off by the Upstox RMS team one day prior to expiry at 2:30 p.m. and no fresh positions will be allowed after the square-off time.
