Announcements

Rights Entitlements (REs) is the number of new shares that the shareholder of a company is eligible to apply for under the Rights issue offer of that company. The REs will be in the form of temporary Demat securities which will lapse if you do not use them to apply for the rights or sell them.

Below are the REs listed for the month of January 2023

As per SEBI, the T+1 settlement cycle is now becoming applicable to all equity stocks.

This is being implemented in a phased manner. The first list of stocks applicable for the T+1 settlement cycle went live from 25th February 2022. The last list of stocks applicable for the T+1 settlement cycle will go live from 27th Jan 2023.

However, to avoid any pay-in shortage due to this change you will not be allowed to sell T1 holdings of the following stocks:

STOCKS MOVING TO T+1 SETTLEMENT CYCLE FROM 27TH JANUARY 2023

But you will still be able to see them under ‘T1 holdings’.

Also note that all pending securities in bonds, Mutual Funds, etc will also be moving to T+1 settlement and not be available for selling on that day.

All ITM Natural Gas option contracts on 23rd January 2023 will be converted into futures contracts. 

To avoid square-off, ensure that you maintain a sufficient margin for the future contracts before 10.00 PM today.

As per a SEBI mandate, physical settlement is compulsory if a trader holds a position in any Stock F&O contracts on the expiry date.

What is Physical Settlement?

In a Stock F&O contract, when there is an open position that has not been squared off by its expiry date, Physical Settlement takes place. This implies they have to physically give/take delivery of Stocks to settle the open transactions instead of settling them with cash.

Examples of physical settlement:

Futures

Long positions of 1 lot of Reliance, 250 quantity at Rs. 2000 i.e. Rs. 5 lakh contract value

F&O = 20% charges i.e. Rs. 1,00,000. This means, you are required to give Rs. 1 lakh, but if you decide to physically settle then you need to have a complete contract value of Rs. 5 lakhs.

Short positions of 1 lot Reliance 250 quantity at Rs. 2000 i.e. Rs. 5 lakh contract value

F&O = 20% charges i.e. Rs. 1,00,000. This means, you are required to give Rs. 1 lakh, but if you decide to physically settle then you need to have the holdings of 250 quantity of Reliance and Rs. 1 lakh margin money till expiry date.

Options

Long - 1 lot of Reliance, 250 quantity for strike price of Rs. 2000 Call (CE) Options.

If the underlying price of Reliance is greater than the strike price of Rs. 2000, then the contract is said to be ITM (In-The-Money). If you wish to go for physical settlement, you need to maintain a free ledger balance of Rs 5 Lakh in your account, else physical settlement would not be done.

Long - 1 lot of Reliance, 250 quantity for Strike price of Rs. 2000 Put (PE) Options.

If the underlying price of Reliance is lesser than strike price of Rs. 2000, then the contract is said to be ITM (In-The-Money). If you wish to go for physical settlement, you need to provide the Stocks (shares) equal to the lot quantity positioned to be available in Demat account, else physical settlement would not be done.

Please note --

• - Short ITM PE options, and treatment would be similar to Long ITM CE options.
  Free ledger balance equal to the contract value to be maintained.

• - Short ITM CE options, treatment would be similar to Long ITM PE options.
  Holdings shares of lot quantity are positioned to be available in the Demat account.

What is the process for Physical Settlement on Upstox?
To opt for physical settlement on Upstox, you need to provide your consent first, and here are the details for the same:

• - To provide your consent for physical settlement of open Stock F&O contract(s) with January 2023 expiry visit the ‘Profile’ section on your Upstox account on our App / Web and give your consent from here before EOD on Monday, 23rd January 2023.

• - Based on your consent, Upstox will evaluate whether your position qualifies for physical settlements and if there are sufficient ledger balances/holdings (whichever applicable) is available.

• - Kindly, plan your trades keeping in mind that you will not be able to trade in fresh positions in the current January 2023 expiry F&O contracts from Tuesday, 24th January 2023 onwards.

• - Correspondingly, position conversion(s) on carry forward of any stock futures positions shall also not be permitted.

What other impact could this have on your positions?
Your position will automatically be squared-off on expiry day at 12:00 PM in case:

• - You have not provided your consent for physical settlement

• - You provided your consent for physical settlement and do not have Ledger Value (equal to contract value) / holdings available for the physical settlement of your positions.

• - In the case of funds / holdings not being available for all the open positions, we will execute square offs for all the positions. Thus no partial funds / holdings evaluation for the expiring positions will be considered by our team.

What else to keep in mind?
Delivery margins would be applicable as per Exchange norms on all the existing long ITM (In The Money) stock option positions in a staggered manner as explained below:

• • -> 10% of delivery margins computed on expiry -4 days EOD (Friday)

  • -> 25% of delivery margins computed on expiry -3 days EOD (Monday)

  • -> 45% of delivery margins computed on expiry -2 days EOD (Tuesday)*

  • -> 70% of delivery margins computed on expiry -1 day EOD (Wednesday)*

• - To avoid margin shortages, Upstox would be blocking such (above-mentioned) delivery margins from the Beginning of the Day (BOD) instead of the End of the Day (EOD).

• - If the positions are not squared off for any reason (e.g: non-liquidity), then the contract would have to be settled physically and you would be liable to pay the entire amount of the settlement.

* If you have opted for physical settlement, you would be required to fulfill the entire funds (contract value) / holdings requirement by EOD on Monday, 23rd January 2023.

In the case of spread contracts, you are advised to provide margins for both legs since the risk of one leg square off by you at anytime would result in the physical settlement of the other leg.

Brokerage in Physical settlement:

Since there is a substantial increase in effort and risk to settle these F&O positions resulting in physical delivery, if F&O positions result in the physical delivery brokerage will be 0.25% of the physical settled value. For all the netted-off positions brokerage will be 0.1% of the physical settled value. All physical settled contracts (Futures & Options) will also carry an applicable Exchange charge.

And that’s all. Keep a watchful eye on this page for more updates from Upstox!

All ITM Crude Option contracts on 17th January 2023 will be converted into Futures contracts. 

To avoid square-off, ensure that you maintain a sufficient margin for the Future contracts before 10.00 PM today.