How are MCX contracts settled?
Commodity Futures
Commodity futures contracts can be cash or physically settled. However, Zerodha does not allow physical settlement. If the positions are not closed before the start of the delivery period, Zerodha may square them off, and ₹50 + 18% GST will be applicable for each auto-squared-off order. The settlement type and the last dates of trading can be found on this list. (DOC)
Commodity Options
All ITM commodity options contracts are devolved into their respective futures contract of the current month on the day of expiry. ITM contract held till expiry will require margins equal to the futures contract to let it devolve on the next trading day.
Example Scenario
- Gold is at 31500 levels.
- GOLD 19JAN 31000 CE is an ITM option contract.
- On expiry day, GOLD 19JAN 31000 CE will devolve into GOLD 19FEB FUT, with a buy average of 31000.
If the exchange cannot match the contract with a counterparty, the ITM options trade will be cash-settled instead of devolving into a futures contract. To learn more, see What is devolvement for commodity options and how does it work?
Still need help?