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

Implications of gordon’s fundamental valuation, Q. Implications of Gordons ...

Q. Implications of Gordons fundamental valuation? Explanation: - The implications of Gordon's fundamental valuation may be as below: (1) While the rate of return of the firm

Describe concepts of finance function, Q. Describe Concepts of finance func...

Q. Describe Concepts of finance function ? 1) The finance function in the business task in the providing funds needed by the enterprises on the term that one most favorable in

Alternative dividend policies, The managing directors of three profitable l...

The managing directors of three profitable listed companies discussed their companies'' dividend policies at a business lunch. Company A; has deliberately paid no dividends for th

Capital investment decisions, what are the key stages in capital investment...

what are the key stages in capital investment decision-making process and the role of investment appraisal in this process?

What typ, how would you judge the potential profit of bajaj electronics on ...

how would you judge the potential profit of bajaj electronics on the first year of sales to booth plastics and give your views to increase the profit ?

Role of custodians, Role of Custodians The Securities and Exchange Boar...

Role of Custodians The Securities and Exchange Board of India on 5th May, 1996, through its notification No.S.O.344 (E) has issued the SEBI (Custodian of Securities) Regulation

Loan schedules - fixed vs floating, Consider a mortgage example to nance ...

Consider a mortgage example to nance the purchase of a house or flat. You may use a real example or create a ctitious one. Search for di erent types of mortgages currently on o e

Use of derivatives in equity portfolio management, Do you provide assignmen...

Do you provide assignment help on the topic Use of Derivatives in Equity Portfolio Management?

Calculate the net present value-investment proposal, As you checked the Ans...

As you checked the Answer Key to Question 6 in the Mastery Check from this lesson you may have noted that each year's net cash flows are calculated by adding depreciation back to n

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