Contract Specifications - Energy Futures

The upper and lower price band shall be determined based on statistical method as decided by the Exchange/Clearing Corp and relaxed considering the movement in the underlying futures contract. In the event of freezing of price ranges even without a corresponding price relaxation in underlying futures, if deemed necessary, considering the volatility and other factors in the option contract, the Daily Price Limit shall be relaxed by the Exchange.

The Initial Margin shall be computed using SPAN (Standard Portfolio Analysis of Risk) software, which is a portfolio based margining system. To begin with, the various risk parameters shall be as under:

A. Price Scan Range – 3.5 Standard Deviation (3.5 sigma)

B. Volatility Scan Range – As decided by the Clearing Corp from time to time. For applicable VSR refer latest circulars issued by the Clearing Corp.

C. The Short Option Minimum Margin (SOMM) and Margin Period of Risk (MPOR) shall be in accordance with SEBI Circular no. SEBI/HO/CDMRD/DRMP/CIR/P/2020/15 dated January 27, 2020. For applicable SOMM and MPOR refer to the latest circulars issued by the Clearing Corp from time to time.

D. Extreme Loss Margin – Minimum 1%

E. Premium of buyer shall be blocked upfront on real time basis.

F. For Additional Margin refer latest circulars issued by the Clearing Corp from time to time.

a) In the initial phase, a sensitivity report shall be provided to members of the impending increase in margins at least 2 days in advance. The mechanism shall be reviewed and if deemed necessary, pre-expiry option margins shall be levied on the buy / sell / both positions during the last few days before the expiry of the option contract.

Position limits for options would be separate from the position limits applicable on futures contracts.

For individual clients: 9,60,000 barrels or 5% of the market wide open position, whichever is higher for all WTI Crude Oil Options contracts combined together.

For a member collectively for all clients: 96,00,000 barrels or 20% of the market wide open position, whichever is higher for all WTI Crude Oil Options contracts combined together.

Upon expiry of the options contract, after devolvement of options position into corresponding futures positions, open positions may exceed their permissible position limits applicable for future contracts. Such excess positions shall have to be reduced to the permissible position limits of futures contracts within two trading days.

Position limits for Options would be separate from the position limits applicable on Futures Contracts.

For individual clients: 120,00,000 MMBtu or 5% of the market wide open position, whichever is higher for all Natural Gas Options Contracts combined together.

For a member collectively for all clients: 12,00,00,000 MMBtu or 20% of the market wide open position, whichever is higher for all Natural Gas Options Contracts combined together.

Upon expiry of the Options Contract, after devolvement of Options position into corresponding Futures positions, open positions may exceed their permissible position limits applicable for Future Contracts. Such excess positions shall have to be reduced to the permissible position limits of Futures Contracts within two trading days.

T + 1 day

On expiry of options contract, the open position shall devolve into underlying futures position as follows:

• Long call position shall devolve into long position in the underlying futures contract
• Long put position shall devolve into short position in the underlying futures contract
• Short call position shall devolve into short position in the underlying futures contract
• Short put position shall devolve into long position in the underlying futures contract

All such devolved futures positions shall be opened at the strike price of the exercised options

All In the money (ITM)# option contracts shall be exercised automatically, unless ‘contrary instruction’ has been given by long position holders of such contracts for not doing so.

The ITM option contract holders, who have not submitted contrary instructions, shall receive the difference between the Settlement Price and Strike Price in Cash as per the settlement schedule.

In the event contrary instruction are given by ITM option position holders, the positions shall expire worthless.

All Out of the money (OTM) option contracts shall expire worthless.

All devolved futures positions shall be considered to be opened at the strike price of the exercised options.

All exercised contracts within an option series shall be assigned to short positions in that series in a fair and non-preferential manner.

#ITM for call option = Strike Price < Settlement Price

ITM for put option = Strike Price > Settlement Price