The computation of risk arrays for Index option contract is done only at discrete time points each day and the latest available risk arrays index options applied to the portfolios on a real time basis. The risk arrays is updated 5 times in a day taking the closing price of the previous day at the start of trading and taking the last available traded index options at A portfolio based margining model is adopted which will take an integrated view of the risk involved in the portfolio index options each individual client comprising of his positions in all the derivatives contract traded on Derivatives Segment.
The parameters for such a model are as follows: The initial margin or the worst scenario loss is adjusted against the available liquid net worth of the Member. Members in turn will collect the initial margin from their clients on an up front basis.
The scenarios to be used for this purpose are: The Black-Scholes model is used for valuing options. Index options notional value of option positions is calculated by applying the last closing price of the underlying Index. Thus mark-to-market gains and losses on option positions will be adjusted against the available liquid networth of the Clearing Member. Since the options are premium style, there will be no mark-to-market profit or loss. However, the premium is index options only for those portfolios where open position is long for a particular series.
However, BSE may specify higher exposure margin for better risk management. The stocks shall be valued at the closing price in the cash market as on the previous trading day. Long positions in Index Derivatives long futures, long alls and short puts not exceeding index options notional value the FIIs holding of cash, government securities, T-Bills and similar instruments.
The government securities and T-Bills are to be valued at book value. Therefore, the NRI position limits shall be: This limit would be applicable on open positions in all options contracts on a particular underlying index options as prescribed by SEBI.
In addition to the above, Mutual Funds can take exposure in equity index derivatives index options to the following limits Short positions in Index Derivatives Short Index options, Short Calls and Long puts not exceeding in notional value the Mutual Fund holding of stocks. Long positions in Index Derivatives long futures, long alls and short puts not exceeding in notional value the Mutual Fund holding of cash, government securities, T-Bills and similar instruments.
Exercise Limits At present, there is no exercise index options for trading in Index Option contracts. However, the Derivatives Segment may specify such limit, index options it may index options fit from time to time.
Assignment of Options On exercise of an Option by an option holder, it will be assigned to the option writer on random basis at client level. The settlement shall take place on the closing price of the underlying in the equity segment.
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If youre unsure or have any questions, the Contact Centre is here to help. Inquiries can also be answered in index options 200 languages. Call options give you the right to buy a stock at a certain price by a certain date.