What happens to OTM positions marked for physical delivery?
No, you do not need to mark physical delivery for OTM options.
Here’s why:
OTM (Out-of-the-Money) options have no intrinsic value at expiry.
These contracts expire worthless, meaning there is no obligation to give or
take delivery.
Physical settlement is only applicable for In-the-Money (ITM) options where the
strike price has value at expiry.
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Will physical delivery positions be squared off automatically?
No, contracts marked for physical delivery will not be squared off automatically.
Is there any change in the margin requirement for physical delivery?
Yes, the system will now charge the appropriate physical delivery margin requirement for all contracts marked for physical delivery, including OTM contracts.
What are the new major changes in the physical delivery process?
Previously, only in-the-money (ITM) contracts were eligible for physical delivery marking. Now, we allow contracts up to 5% out-of-the-money (OTM) to be marked for physical delivery.
What are the risks associated with the physical delivery of stock Futures & Options (F&O)?
In the Indian capital markets, the physical delivery of stock derivatives, particularly stock futures and in-the-money stock options at expiry, introduces significant systemic risks. Here's a simplified breakdown of the implications: 1. Stock Futures ...
What is physical delivery?
Understanding Physical Delivery in Derivatives Trading Physical delivery refers to the actual transfer of the underlying asset—such as stocks, commodities, or bonds—when an options or futures contract reaches its expiration. Unlike cash settlement, ...