Announcements

As mentioned in the meeting held on 18th May 2021 with its Board of Directors, Aarti Industries Limited (AARTIIND) has decided to approve the Bonus issue of company shares in the ratio of 1:1, i.e one (1) Equity Share of face value of Rs. 1/- each to one (1) Equity Shares of face value of Rs. 1/- each.

The company has also fixed the Record Date as 23rd June 2021 for the purpose of determining the shareholders who will be eligible to apply for the Issue.

The Ex- date for the bonus issue is 22nd June 2021. 

 Adjustment factor
Adjustment factor for Bonus issue of A: B is defined as (A+B)/B. In the case of AARTIIND, the adjustment factor is (1+1)/1 = 2, since the Bonus issue ratio is 1:1.

Adjustments for Options Contracts:

1. Strike Price: The adjusted strike price can be calculated by multiplying the old strike price by the adjustment factor.

2. Market Lot: The adjusted market lot can be calculated by dividing the old market lot by the adjustment factor. The revised market lot would be 850.

 Adjustments for Futures Contracts:

1. Futures price: The adjusted Futures base price can be calculated by multiplying the old Futures base price by the adjustment factor.

2. Market Lot: The adjusted market lot can be calculated by dividing the old market lot by the adjustment factor. The revised market lot would be 850.

To know more, read the circular here.

Note: You may see a slight deviation in c/f average price of AARTIIND because of changes in lot size and strike price due to the said corporate action.

As per a SEBI mandate, physical settlement is compulsory if a trader holds a position in any Stock F&O contracts on 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:
Future

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.

Option

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, 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 positioned to be available in 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:

1. To provide your consent for physical settlement of open Stock F&O contract(s) with June-2021 expiry visit the ‘Profile’ section on your Upstox account on our App / Web and give your consent from here before EOD on Tuesday, 22nd June 2021.
2. Based on your consent, Upstox will evaluate whether your position qualifies for physical settlements and if there is sufficient  ledger balances / holdings (whichever applicable) is available.
3. Kindly, plan your trades keeping in mind that you will not be able to trade in fresh positions in the current June-2021 expiry F&O contracts from Wednesday, 23rd June 2021 onwards.
4. 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 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 a 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 Beginning of the Day (BOD) instead of 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 fulfil the entire funds (contract value) / holdings requirement by EOD on Tuesday i.e. 22nd June 2021.

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

As per the Exchange circular, the size of Nifty contracts is being revised from 75 to 50 per lot and here’s what you need to know.

What’s the revision:

1. July 2021 expiry contracts will be revised for market lots
2. All subsequent contracts (i.e. July 2021 monthly expiry and beyond) will have revised market lots
3. All contracts after the July monthly expiry will have a revised lot size of 50
4.The August weekly expiry contracts and all contracts after it will have a revised market lot size of 50
5. All existing NIFTY long term options contracts, with an expiry greater than 3 months, will have a lot size revised from 75 to 50. This is applicable after the expiry of June 2021 contracts (i.e. 25th June 2021)

What it means for you:
To understand this revision better, here’s an example.

Consider that you have position in Nifty beyond the July monthly expiry, In this case, before the 24th of June, you will have to do one of the following:

1. Convert the position into multiples of 50
2. Have position(s) in multiples of 50 - here your current 2 lots (75 x  2 = 150) will then become 3 lots (50 x 3 = 150)
3. Square off the existing position, if it is not in multiples of 50

Remember, if your remaining quantity is not in multiples of 50, you will not be able to square off your position until expiry. So, if you hold the position of 1 lot (quantity - 75) after 25th June 2021, you will be able to only square off 1 lot (quantity- 50) at that time. Thus your remaining quantity = 25, can only be expired and not squared off as per your wish at any point in time.

Kindly plan your trades accordingly. You can also get more details by reading the circular here: https://bit.ly/3uHXOiY

Looking for more information? Learn more about lot sizes and what they mean here.