How are MCX contracts settled?
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, they may be squared off by Zerodha, 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)
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.
- 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 is unable to match the contract with a counterparty, the ITM options trade will be cash-settled instead of getting devolved into a futures contract. To learn more, see What is devolvement for commodity options and how does it work?