Notice Board

In The Money (ITM) options expiring on MCX will devolve into futures contracts

This is to inform you that all ITM options contracts which are expiring on MCX will devolve into futures contracts upon delivery. On exercise, options positions shall devolve into the underlying futures positions as per the following Mode of Settlement:

  • Long Call position shall devolve into a long position in the underlying Futures contract.
  • Long Put position shall devolve into a short position in the underlying Futures contract.
  • Short Call position shall devolve into a short position in the underlying Futures contract.
  • Short Put position shall devolve into a long position in the underlying Futures contract.

At the expiry of the options contract, all such devolved futures positions shall be opened at the strike price of the exercised options.

Exercise Mechanism at Expiry: All option contracts belonging to ‘Close to the money’ (CTM)* option
series shall be exercised only on ‘explicit instruction’ for exercise by the long position holders of such contracts. All In the money (ITM) option contracts, except those belonging to ‘CTM’ option series, shall be exercised automatically, unless ‘contrary instruction’ has been given by long position holders of such contracts for not doing so. The ITM option contract holders and the CTM option series holders who have exercised their options by giving explicit instructions shall, receive the difference between the Settlement Price and Strike Price in Cash as per the settlement schedule.

In the event contrary instruction are given by ITM option position holders (other than those belonging to CTM option series), the positions shall expire worthless. All CTM positions which are not exercised shall also expire worthless. All Out of the money (OTM) option contracts, except those belonging to ‘CTM’ option series, shall expire worthless.

In the event the OTM position holders, which are in CTM option series, exercise their option positions, shall be required to pay and settle the difference between strike price and settlement price as per the
settlement schedule. All devolved futures position shall be considered to be opened at the strike price of the exercise options.

* Option series having strike price closest to the Daily Settlement Price (DSP) of Futures shall be termed as At the Money (ATM) option series. This ATM option series along with two option series each having strike prices immediately above and below ATM shall be referred to as ‘Close to the money’ (CTM) option series. In case the DSP is exactly midway between two strike prices, then immediate two option series having strike prices just above DSP and immediate two option series having strike prices just below DSP shall be referred as ‘Close to the money’ (CTM) option series.

 

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