Deep Out-of The Money (OTM) contracts
This has reference to Exchange circular NSE/SURV/42382 dated October 11, 2019 on Surveillance measures for Deep Out-of The Money (OTM) contracts.
FAQs:
Deep OTM are those strikes traded by any entity/client in which;
-
Fresh short positions are created and
-
At the time of such trade, the strike price is 30% away from the underlying price
Illustration 1:
|
Strike Price |
Option Type |
Order Time |
Underlying Price at the time of order |
Trade Time |
Underlying Price at the time of Trade |
Strike price away from underlying |
Remarks |
|---|---|---|---|---|---|---|---|
|
135 |
CE |
10:00:00 |
115 |
10:10:00 |
100 |
35% |
Strike to be considered for levy of additional margin |
|
60 |
PE |
10:30:00 |
90 |
10:50:00 |
100 |
40% |
Strike to be considered for levy of additional margin |
|
Strike Price |
Option Type |
Order Time |
Underlying Price at the time of order |
Trade Time |
Underlying Price at the time of Trade |
Strike price away from underlying |
Remarks |
|---|---|---|---|---|---|---|---|
|
135 |
CE |
10:00:00 |
100 |
10:10:00 |
115 |
Below 30% |
Strike shall not be considered |
|
65 |
PE |
10:30:00 |
100 |
10:50:00 |
90 |
Below 30% |
Strike shall not be considered |
Only those entities/clients which trades and creates fresh short positions in a strike which is 30% away from the Underlying Price at the time of trade shall be shortlisted.
Clients shall be identified as follows:
- Top clients subject to a maximum of top 10 clients which constitutes 30% of the total fresh short positions in the contract.
- No clients to be considered if top 10 clients do not account for 30% of the fresh short position in the contract.
The additional margin shall be levied on such identified clients at the rate of 20% on notional value of the fresh short positions created.
Notional Value = Close Price of the Underlying * Fresh Short Quantity
Illustration 1: Scrip: ABC Limited; Option Type: CE.
Strikes: All strikes which during the day were 30% away from the underlying at the time of trade
|
Client |
Fresh Short Open Interest |
Percentage to OI |
Remarks |
|---|---|---|---|
|
A |
95 |
10.02 |
Shortlisted for additional margin |
|
B |
85 |
8.97 |
Shortlisted for additional margin |
|
C |
78 |
8.23 |
Shortlisted for additional margin |
|
D |
76 |
8.02 |
Shortlisted for additional margin |
|
E |
72 |
7.59 |
|
|
F |
69 |
7.28 |
|
|
G |
65 |
6.86 |
|
|
H |
62 |
6.54 |
|
|
I |
61 |
6.43 |
|
|
J |
59 |
6.22 |
|
|
K |
58 |
6.12 |
|
|
L |
57 |
6.01 |
|
|
M |
56 |
5.91 |
|
|
N |
55 |
5.80 |
|
|
Total |
948 |
|
|
Illustration 2: Scrip: ABC Limited; Option Type: PE
Strikes: All strikes which during the day were 30% away from the underlying at the time of trade
|
Client |
Fresh Short Open Interest |
Percentage to OI |
Remarks |
|---|---|---|---|
|
F |
100 |
7.30 |
Shortlisted for additional margin |
|
G |
100 |
7.30 |
Shortlisted for additional margin |
|
I |
99 |
7.23 |
Shortlisted for additional margin |
|
A |
99 |
7.23 |
Shortlisted for additional margin |
|
E |
98 |
7.15 |
Shortlisted for additional margin |
|
B |
98 |
7.15 |
Shortlisted for additional margin |
|
C |
97 |
7.08 |
|
|
D |
97 |
7.08 |
|
|
H |
97 |
7.08 |
|
|
J |
97 |
7.08 |
|
|
K |
97 |
7.08 |
|
|
L |
97 |
7.08 |
|
|
M |
97 |
7.08 |
|
|
N |
97 |
7.08 |
|
|
Total |
1370 |
|
|
Additional margin of 20% on the notional value shall be levied and blocked from the collateral deposits of clearing member of the highlighted clients.
The margins levied on clients identified as per (3) above shall be grossed up at the trading member level. The margins grossed up at the trading member level shall be aggregated at the clearing member level and blocked from the collateral deposits of such clearing member.
The following file shall be sent to the Trading Member(s) through extranet on an end of day basis:
TM Code_Addln_Margin_DDMMYYYY.csv containing client wise / scrip wise details of strike which are shortlisted for additional margin as per (3) above.
The above file shall be available for download at the following location:
Faoftp/Investigation/Dnld
The following file shall be sent to the Clearing Member(s) through extranet on an end of day basis:
F_Primary Member Code_ASMOTM_DDMMYYYY.csv containing trading member wise / client wise / scrip wise details of strike which are shortlisted for additional margin as per (3) above.
The above file shall be available for download at the following location:
Faoftp/Letters/Dnld
The Collateral Break up report (CL01) shall also include information on the additional margin blocked from their collateral deposits.
The additional margin shall be retained with Clearing Corporation till expiry of contract or till square-up of positions, whichever is earlier.
In case of any further queries, you may write to us at surveillance@nse.co.in or call on +91-22-26598417/ 8418/ 8129/ 8166
Updated on: 02/01/2023
