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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.
how do you find total cash outflow through maturity
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