If you hold an In-the-Money (ITM) stock option or a stock futures contract till expiry, you must either take or give delivery of the underlying shares. All stock F&O contracts traded on Indian exchanges are compulsorily physically settled.
Out-of-the-Money (OTM) stock options expire worthless and do not result in delivery obligations.
Index F&O contracts, however, are cash-settled.
Delivery Obligations Post-Expiry
| Contract Type | Security Receivable | Security Deliverable |
|---|---|---|
| Futures | Long Futures | Short Futures |
| Call Options | Long ITM Call | Short ITM Call |
| Put Options | Short ITM Put | Long ITM Put |
To fulfill delivery obligations, you must maintain full cash balance or stocks equivalent to the entire contract value after expiry. Since delivery risk increases closer to expiry, margin requirements rise accordingly.
Margin Requirements
Futures & Short Options (Calls & Puts)
On expiry day, margin increases to 50% of contract value or 1.5× NRML margin (whichever is lower). The additional margin reflects under the Exposure margin.
Long (Buy) Options
Although long options require only premium upfront, ITM positions can lead to physical delivery. Therefore, exchanges levy physical delivery margins starting 4 days before expiry, applicable only to ITM contracts (or if OTM turns ITM).
| Day (BOD) | Margin Applicable |
|---|---|
| E-4 Day | 10% of VaR + ELM + Adhoc |
| E-3 Day | 25% of VaR + ELM + Adhoc |
| E-2 Day | 45% of VaR + ELM + Adhoc |
| E-1 Day | 25% of contract value |
| Expiry Day | 50% of contract value |
Failure to maintain prescribed margins may attract exchange penalties.
Risk Management & Square-off
Positions may be squared off if margin requirements are not met within stipulated timelines. If square-off is not possible, compulsory physical delivery may occur, and the client bears all associated risks and costs.
Upon delivery:
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100% of contract value is debited
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Shares appear as T1 holdings
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Proceeds from selling T1 holdings are not considered for margin shortfall
Take Delivery (Stock Receivable)
If sufficient funds are unavailable post-expiry:
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Account may go into debit
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Interest at 0.05% per day is charged
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Stocks may be sold to recover dues
For non-DDPI/POA clients, securities may be temporarily pledged until dues are cleared.
Give Delivery (Stock Deliverable)
For short futures, short calls, and long puts:
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Stocks must be available in the demat account on expiry
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Pledged securities are considered
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If stocks are unavailable, short delivery and auction penalties apply
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Buying stocks on expiry or post-market session can offset obligations
Netting & Spread Positions
Opposing delivery obligations in the same stock are netted off. However, delivery margins are charged separately on each open F&O position.
Corporate Actions (Merger/Demerger)
In such cases, contracts are force-closed and physically settled on a revised expiry date, with 100% margin required on expiry day.
Settlement Prices
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Futures: Settlement price on expiry
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Options: Strike price (ITM options exercised automatically)
P&L discrepancies, if any, typically resolve within 48 hours.
Important Notes
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Physical delivery brokerage may be higher due to operational complexity
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STT of 0.1% applies to both buyer and seller
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OTM options close to LTP may be squared off to prevent unintended delivery
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Policies are subject to change as per Risk Management System (RMS) discretion