Which MCX contracts are compulsory delivery contracts?
Some commodity futures contracts are cash-settled whereas some are physically settled. You can check the settlement type and the last dates of trading commodity contracts in Zerodha in this sheet .
Learn more about the settlement types of commodity futures and options contracts below:
MCX has two different modes of settlement for its commodity contracts. They are:
1. Cash Settlement- These contracts are cash settled on the expiry day at the due date rate declared by the exchange
2. Physical Delivery Settlement - Delivery of the commodity equal to the lot size is given to the buyer(long position) by the seller of the contract from the exchange defined delivery warehouse. Physical delivery settlement can also be of two types:
- Staggered- The exchange can mark any of the open contracts as delivery during the delivery intention period. Even if the contract is closed after your contract is marked as delivery, the delivery obligation will remain.
- Compulsory- All contracts will be compulsorily physically settled by the exchange if the contract is open on the expiry day.
At Zerodha, we do not offer physical delivery of commodities. Hence, we ask our clients to close their open positions before the start of the delivery period.
All CTM(close to the money) commodity options contracts are devolved into the respective futures contract on the day of expiry of the option contract. If you hold a CTM contract on expiry, you are required to maintain margin equal to the futures contract on the expiry date to let it devolve to a future contract the next trading day.
Read more on how the devolvement process works in this chapter on Varsity
Note : In case the exchange is unable to match your contract with a counter-party, your ITM options trade will be cash-settled instead of getting devolved into a futures contract.