Markets

Sebi simplifies process for exercising commodity options contract

Suresh P. Iyengar | | Updated on: Jan 04, 2022

FILE PHOTO: The logo of the Securities and Exchange Board of India (SEBI) is pictured on the premises of its headquarters in Mumbai, India March 1, 2017. REUTERS/Shailesh Andrade/File Photo | Photo Credit: SHAILESH ANDRADE

On expiry, all ‘in the money’ option contracts will be exercised automatically, unless otherwise specified

Market regulator Sebi has decided to simplify the exercise mechanism of option contracts on commodity futures.

On expiry, all ‘in the money’ option contracts will be exercised automatically, unless ‘contrary instruction’ has been given by long position holders, said Sebi.

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All ‘out of the money’ option contracts shall expire worthless, it added.

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Earlier, all the ‘close to money’ contracts could also be exercised on explicit instructions from long position holders.

However, with the recent changes, there will be no ‘close to money’ series of options. All ‘out of the money’ and ‘at the money’ contracts go worthless.

“All exercised contracts within an option series shall be assigned to short positions in that series in a fair and non-preferential manner,” it said.

The circular will come into effect from new series of commodity derivatives launched on or after February 1, it said.

Published on January 04, 2022
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