Settlement of the index options contract, Financial Management

Settlement of the Index Options Contract

In the index options contract, the premium to be paid or to be received is calculated for each CM after netting the positions at the end of each day. The CMs who have to pay the premium pay them to NSCCL and this is adjusted with those who have to receive the premium. This is known as daily premium settlement, CMs are responsible for collecting and settling the premium amounts from the TMs and their clients. The premium to be paid or received is directly debited or credited respectively to the CM's clearing bank account.

On the expiry day of the options contract, NSCCL will determine the outstanding in-the-money contracts based on the final settlement price, and the resulting profit or loss will be settled in cash. The final settlement price is the closing value of the underlying index price on the expiration day of the contract. The final settlement profit or loss will be the difference between the stock price and the final settlement price of the relevant index option contract. Final settlement profit or loss amount is credited or debited to the relevant CM's clearing bank account on the day following the expiry day.

Settlement of Options Contracts on Individual Securities

The premium to be paid or received is netted across all option contracts on individual securities at the client level to determine the net premium payable or receivable at the end of each day. The settlement procedure is similar to that of the index option contracts. Interim exercise settlement is effected for exercised option positions at in-the-money strike prices, at the close of trading hours on the exercise day. The interim exercise settlement price is the clearing price of the underlying security on the exercise day. The settlement value is the difference between the strike price and the exercise settlement price of the option contract. The exercise settlement value is debited or credited to the CM's clearing bank account on the third day of the exercise day.

 

Posted Date: 9/10/2012 9:32:49 AM | Location : United States







Related Discussions:- Settlement of the index options contract, Assignment Help, Ask Question on Settlement of the index options contract, Get Answer, Expert's Help, Settlement of the index options contract Discussions

Write discussion on Settlement of the index options contract
Your posts are moderated
Related Questions
Explain the preferred stocks by equity claims. Preferred stocks are equity claims with limited ownership rights in comparison to common stocks. They differ from common stocks i

You've just won a huge $100 million lottery.  You've decided to invest your winnings in the following way:  $30 million in real estate,  $30 million in  corporate bonds and $40 mil


What kinds of U.S. companies would benefit most from a stronger dollar in the foreign exchange market?  Explain. U.S. companies that import merchandise from other countries wou

Specialized Stock Indexes The most regularly quoted market indices are those that include the stocks of the largest listed companies on a nation's largest stock exchange. Examp

Explain the Difference between cash and profit Cash flow statement shows all the cash in and cash out for the organisation for that period. It demonstrates the cash generating

#quA stock has a current dividend of $0.32 with a growth rate of 8% annually. Assuming a 10% annual discount rate, what should the price of the stock be one year from today? Answer

Z works for HS Company and has been asked to undertake an assessment of any health and safety issues that might be potential hazards in the department which she manages. Z's respon

•What categories and in what amounts should Jenny allocate her funds to reflect a balanced monthly budget? Include the main categories as well as examples of other categories.

the stock of akpan ltd performs well during recessionary periods, and the stock of okon ltd does well during growth periods. both stocks are currently selling for Rs 100 per share