This rollover can be completed at any time until the market closes on February 22nd, 2018. So, if you bought the Nifty February future at 11050 and the Nifty future at 11000 on February 20th, you decide to roll over your position to March in order to continue your nifty future buy position.
What is the procedure for rolling over a futures contract?
Traders will roll over futures contracts that are about to expire to a longer-dated contract in order to keep their positions the same after expiration. The role entails selling an existing front-month contract in order to purchase a similar contract with a longer maturity date.
Zerodha, what happens when a futures contract expires?
If you have a “take delivery” position after the expiration date and don’t have enough money in your trading account, the account will be debited. On the debit balance, there is a 0.05 percent interest charge. This could also suggest that our RMS team will sell the stock to cover the account’s debit amount.
Stock deliverable positions (Give delivery)
Stock available in your demat account is debited towards meeting exchange obligations in the case of short futures, short calls, and long puts where delivery of the stock is required after expiry. Short deliveries and auction penalties will occur if stock is not available in the demat account.
You must have equities in your demat account throughout the expiry week for all give delivery positions.
4 Short delivery and auction fines will result if any OTM position becomes ITM, resulting in a provide delivery position after expiry without sufficient stocks in demat.
Spread and covered contracts.
Give and take delivery are netted off if you have numerous F&O positions in the same stock and the overall position in the account results in an equal quantity of both. As a result, on expiry, an equal number of lots of long futures (take delivery) and short ITM calls (give delivery) will result in no delivery obligations because both positions will be netted off.
While the net delivery obligation resulting from the several opposing F&O holdings in the same stock may be zero, delivery margins are nonetheless levied separately on each F&O position. If you have an equal number of short futures and long puts, the delivery margin for both futures and puts contracts will be asked individually. Because you can quit one of the positions, resulting in a delivery obligation, the delivery margin exists.
Buy/Sell price of the physically settled stocks
The expiry day is used as the trading date for all stocks that are credited or debited as a result of physical delivery of F&O. The following is the purchasing or selling price:
F&O P&L for physically settled contracts
Futures: The closing price of the underlying stock is utilized as the exit price for all contracts maintained until expiry.
All ITM stock options that have been held until their expiration date have been exercised. The P&L’s exit price is 0 because the stock is delivered at the strike price.
Notes
1Due to the extra effort, a higher brokerage of 0.25 percent of the total value of physical delivery is levied. The brokerage will be 0.1 percent of the physically settled value for all netted-off positions (spread contracts, iron condor, etc.).
2For both the buyer and the seller of all physically settled contracts, such as stock delivery trades, a STT levy of 0.1 percent of the contract value will be charged.
3If your account has a negative balance and the exchange required delivery margins apply from 5 days before the expiry date, you will be charged 0.05 percent per day in interest (including long ITM options positions)
4
Physically delivered stocks can only be sold T+2 days after the expiry date of the stock when it is delivered to the demat. The crediting of shares from physical delivery post-auction may take up to T+5 days if the counterparty fails to deliver.
5 VaR + ELM + Adhoc (Exchange risk) Margin This sheet contains the stock-by-stock margin percentages.
How does a F&O position get rolled over?
Rolling over money is done on the futures market, not in the stock market. In Indian stock markets, derivatives are referred to as “F&O.”
At the end of the “futures” end date, whatever position you have taken in “futures” will be squared off. Rolling over is when you square off a position in the near month and start a new position in the “mid month” or “far month” in futures.
In the Next f&o segment, the fundamental definition of rollover is “carry forward.” In the f&o section, there are three Valans.
Is it possible to rollover a futures contract during the ban period?
Rollover of contracts during the ban period is not permitted, according to this SEBI circular and exchange clarifications. You will only be allowed to exit an existing position if you have a position in a contract that is currently banned.
What if you keep a futures contract until it expires?
A futures contract’s expiration day is the date on which it will cease to exist. If you keep a contract past its expiration date, you will be obligated to buy the underlying asset. Options allow you to exercise your rights in a variety of ways. Futures do not work in this way.
How long may a futures contract be held?
A demat account is not required for futures and options trades; instead, a brokerage account is required. Opening an account with a broker who will trade on your behalf is the best option.
The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) both provide derivatives trading (BSE). Over 100 equities and nine key indices are available for futures and options trading on the NSE. Futures tend to move faster than options since they are the derivative with the most leverage. A futures contract’s maximum period is three months. Traders often pay only the difference between the agreed-upon contract price and the market price in a typical futures and options transaction. As a result, you will not be required to pay the actual price of the underlying item.
Commodity exchanges such as the National Commodity & Derivatives Exchange Limited (NCDEX) and the Multi Commodity Exchange (MCX) are two of the most popular venues for futures and options trading (MCX). The extreme volatility of commodity markets is the rationale for substantial derivative trading. Commodity prices can swing drastically, and futures and options allow traders to hedge against a future drop.
Simultaneously, it enables speculators to profit from commodities that are predicted to increase in value in the future. While the typical investor may trade futures and options in the stock market, commodities training takes a little more knowledge.
Is it possible to sell futures before they expire?
Purchasing and selling futures contracts is similar to purchasing and selling a number of units of a stock on the open market, but without the need to take immediate delivery.
The level of the index moves up and down in index futures as well, reflecting the movement of a stock price. As a result, you can trade index and stock contracts in the same way that you would trade stocks.
How to buy futures contracts
A trading account is one of the requirements for stock market trading, whether in the derivatives area or not.
Another obvious prerequisite is money. The derivatives market, on the other hand, has a slightly different criteria.
Unless you are a day trader using margin trading, you must pay the total value of the shares purchased while buying in the cash section.
You must pay the exchange or clearing house this money in advance.
‘Margin Money’ is the term for this upfront payment. It aids in the reduction of the exchange’s risk and the preservation of the market’s integrity.
You can buy a futures contract once you have these requirements. Simply make an order with your broker, indicating the contract’s characteristics such as theScrip, expiration month, contract size, and so on. After that, give the margin money to the broker, who will contact the exchange on your behalf.
If you’re a buyer, the exchange will find you a seller, and if you’re a selling, the exchange will find you a buyer.
How to settle futures contracts
You do not give or receive immediate delivery of the assets when you exchange futures contracts. This is referred to as contract settlement. This normally occurs on the contract’s expiration date. Many traders, on the other hand, prefer to settle before the contract expires.
In this situation, the futures contract (buy or sale) is settled at the underlying asset’s closing price on the contract’s expiration date.
For instance, suppose you bought a single futures contract of ABC Ltd. with 200 shares that expires in July. The ABC stake was worth Rs 1,000 at the time. If ABC Ltd. closes at Rs 1,050 in the cash market on the last Thursday of July, your futures contract will be settled at that price. You’ll make a profit of Rs 50 per share (the settlement price of Rs 1,050 minus your cost price of Rs 1,000), for a total profit of Rs 10,000. (Rs 50 x 200 shares). This figure is adjusted to reflect the margins you’ve kept in your account. If you make a profit, it will be added to the margins you’ve set aside. The amount of your loss will be removed from your margins if you make a loss.
A futures contract does not have to be held until its expiration date. Most traders, in practice, exit their contracts before they expire. Any profits or losses you’ve made are offset against the margins you’ve placed up until the day you opt to end your contract. You can either sell your contract or buy an opposing contract that will nullify the arrangement. Once you’ve squared off your position, your profits or losses will be refunded to you or collected from you, once they’ve been adjusted for the margins you’ve deposited.
Cash is used to settle index futures contracts. This can be done before or after the contract’s expiration date.
When closing a futures index contract on expiry, the price at which the contract is settled is the closing value of the index on the expiry date. You benefit if the index closes higher on the expiration date than when you acquired your contracts, and vice versa. Your gain or loss is adjusted against the margin money you’ve already put to arrive at a settlement.
For example, suppose you buy two Nifty futures contracts at 6560 on July 7. This contract will end on the 27th of July, which is the last Thursday of the contract series. If you leave India for a vacation and are unable to sell the future until the day of expiry, the exchange will settle your contract at the Nifty’s closing price on the day of expiry. So, if the Nifty is at 6550 on July 27, you will have lost Rs 1,000 (difference in index levels – 10 x2 lots x 50 unit lot size). Your broker will deduct the money from your margin account and submit it to the stock exchange. The exchange will then send it to the seller, who will profit from it. If the Nifty ends at 6570, though, you will have gained a Rs 1,000 profit. Your account will be updated as a result of this.
If you anticipate the market will rise before the end of your contract period and that you will get a higher price for it at a later date, you can choose to exit your index futures contract before it expires. This type of departure is totally dependent on your market judgment and investment horizons. The exchange will also settle this by comparing the index values at the time you acquired and when you exited the contract. Your margin account will be credited or debited depending on the profit or loss.
What are the payoffs and charges on Futures contracts
Individual individuals and the investing community as a whole benefit from a futures market in a variety of ways.
It does not, however, come for free. Margin payments are the primary source of profit for traders and investors in derivatives trading.
There are various types of margins. These are normally set as a percentage of the entire value of the derivative contracts by the exchange. You can’t purchase or sell in the futures market without margins.
When is it possible to roll a futures contract?
Participants, for example, can roll their futures positions at any point from June to September. The trading floor, on the other hand, follows the norm of rolling the expiring quarterly futures contract month eight calendar days before it expires*. The roll date is what it’s called.