DEMERGER OF RELIANCE STRATEGIC INVESTMENTS LTD & RELIANCE INDUSTRIES LTD: IMPACT ON YOUR F&O POSITIONS

Due to the demerger of Reliance Strategic Investments Limited (RSIL) from Reliance Industries Limited (RIL), the existing contracts of RIL with expiry dates July 27, August 31 and September 28, 2023, will expire on July 19, 2023. Derivatives contracts of RIL shall be introduced again on July 20, 2023 with expiry dates July 27, August 31 and September 28, 2023.

What is a demerger?

De-merger is a type of corporate restructure where a company splits off an existing business or part of its business into a new business entity that operates on its own. In simple terms it means the separation of a large company into one or more companies.

Please find below important information regarding physical settlement of RELIANCE F&O contracts.

Margin requirement for physical settlement in Futures

In a situation that one opts for physical settlement in Futures, cash equivalent to contract value (Open quantity* Futures price) needs to be brought in to take delivery of shares when buying futures.

While selling futures, one needs to ensure that sufficient free shares are available in their demat account before 11 am on the expiry day.

Example for futures: -

Futures:

If you have a long position in 1 lot (250 Qty) RELIANCE futures at Rs.2700 so contract value becomes Rs. 6.75 Lakhs (Qty*Price).

Thus, an initial margin of Rs. 1,35,000 or assuming 20% SPAN + ELM of contract value is required to create an open position. When going for physical settlement, the remaining cash equivalent needs to be brought in beyond the margin deposited amount to Rs. 6.75 Lakhs to take delivery of 250 shares.

When selling a Futures contract in RELIANCE 1 lot (250 Qty) at Rs.2700, contract value becomes Rs. 6.75 Lakhs. You have to pay an initial margin of 1,35,000 or assuming 20% SPAN + ELM of contract value to create an open position. Whilst going for physical settlement, one needs to free the balance of 250 shares in their demat account of RELIANCE to give delivery of 250 shares.

Margin Requirement for physical settlement in Stock Options

Margin requirements in Stock Options work in a different manner from Futures contracts. This is because as the contracts move closer to expiry day, the margin requirements increase and they cannot be rolled over as in the case of Futures contracts.

For long options on expiry day, clients should have 100% of VaR + ELM +Adhoc margins on contract value in their F&O allocation. If the request for physical delivery is available from 9 am to 11 AM, one has to bring margin equal to contract value or free shares in demat. If physical delivery is not requested, the position will get squared off, Long/Short Options at 12 pm & Long/Short Futures at 2:30 pm by the system.

For short call options & go for physical settlement, client needs to ensure sufficient free shares or margin in their trading account. Example: If you have a short call options position in 1 lot RELIANCE 2700 strike price - you have to pay an initial margin to create an open position. If you decide to go for a physical settlement, then you need sufficient free balance in your demat to give delivery of 250 shares at 11 am.

If you have a short put options position in 1 lot RELIANCE 2700 strike price with 250 quantities, you have to pay an initial margin to create an open position. If you decide to go for a physical settlement, then you need to keep the remaining margin on position equivalent to the contract value of Rs. 6.75 Lakhs to take delivery of 250 shares at 11 am

What happens on expiry day?

Square off all open positions in all contracts on 19^th July RELIANCE Ltd expiry or till such time ISec runs the End of Settlement Square-off process for Long/Short Options at 12 pm & Long/Short Futures at 2:30 pm to close all open positions on best effort basis prior to Expiry.

How do you opt for physical settlement in Futures & options?

To mark a position for physical delivery, you need to login to ICICIdirect.com, go to open position page before 11 AM and a link to ‘Choose Delivery’ will be available against each stock contract. Choose Physical Delivery.

Disclaimer: ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. ( Member Code : 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Ms. Mamta Shetty, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The client shall not have any claim against I-Sec and/or its employees on account of any suspension, interruption, non-availability or malfunctioning of I-Sec system or service or non-execution of algo orders due to any link/system failure for any reason beyond I-Sec control. I-Sec reserves the right to pause, stop or call back any of the execution algos in case of any technical or mechanical exigency.