Do Not Exercise Is Back
With immediate effect on April 28th, 2022, the National Stock Exchange of India (NSE) will reinstate the "Do Not Exercise" option in stock option contracts, providing much-needed respite to stock traders. There will be a mandatory physical settlement of stock derivatives in October 2019, according to SEBI. To put it another way, if you have an open position in a stock option contract on the expiration day, you will have to deliver/take stock when the option is exercised. Only if the contract is ITM (In-The-Money) at the time of expiration can it be executed. Are you a regular trader? Then choose Zebu’s online trading platform for analysis and make your trading journey seamless. As an online trading company we ensure our customers are benefited from our lowest brokerage for intraday trading options. Some traders have the option to make a 'Do Not Exercise' request (DNE) in order to avoid exercising their entitlement to give or receive delivery. However, this option will no longer be available after October 2021. On October 14, the final remaining 'Do Not Exercise' facility was shut down. Some options traders who were unable to close their open positions on the expiry date as a result of NSE's action burned their fingertips when they had to settle their shares physically on the expiry date. Depending on the form of option, option holders were virtually required to either take or give physical delivery of the underlying share. The option buyers, who pay a specified sum known as a premium, have the 'right' to buy or sell a stock at a specific price on a specific date or by a specific date, were the most impacted by this change. With the notion that their liability is limited, these traders found themselves caught off guard when their "right" to buy or sell had turned into their "obligation" to take or give delivery of the shares. In order to protect traders who are unable to close down their holdings before the expiry date, the 'Do Not Exercise' option has been reinstated. Choose Zebu’s online trading platform for analysis and make your trading journey seamless. As an online trading company we ensure our customers are benefited from our lowest brokerage for intraday trading options.