Settlement of the index options contract, Financial Management

Assignment Help:

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.

 


Related Discussions:- Settlement of the index options contract

What are the aspects of receivables management, Q. What are the Aspects of ...

Q. What are the Aspects of Receivables Management? Scope or else Aspects or Receivables Management: - Extent of receivables management is quite wide. It comprises the following

Explain short- and long-term financing mix, Q. Explain Short- and long-term...

Q. Explain Short- and long-term financing mix? In forming a fresh business there is no business history to present to the bank thus there is additional uncertainty which will n

Price hike, should a company pursue price hike or focus on increased sales

should a company pursue price hike or focus on increased sales

Rejecting proposed projects when using internal rate of retu, What is the d...

What is the decision rule for accepting or rejecting proposed projects when using internal rate of return? Whenever the internal rate of return is equal or greater than to the

Municipal securities, Municipal Securities are debt securities ...

Municipal Securities are debt securities issued by a State, Municipality or a County in order to finance its capital expenditures. These securit

Capital asset pricing model - working with beta, Your research assistant we...

Your research assistant went home early (rock concert related illness) and left you with the following table listing the expected returns, standard deviation, correlation with the

Calculate most profitable investment, TC  Shipping Ltd has decided to purch...

TC  Shipping Ltd has decided to purchase a machine to augment the company's installed capacity to meet the growing demand for its products. There are three machines under considera

Understand by the term government policy agenda, Question 1: Give an ac...

Question 1: Give an account of the role of governmental bodies and officials in the making of public policies. Question 2: What do you understand by the term "Governmen

Special considerations for high-yield corporate bonds, High-yield ...

High-yield bonds are issued by organizations that do not qualify for "investment-grade" ratings by any one of the leading credit rating agencies

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd