Electricity contracts are always cash settled, meaning you receive or pay the difference between your contract price and the settlement price in cash. At Zerodha, you can hold electricity contracts until 9 PM one day before expiry, after which Zerodha may square off your positions and charge ₹50 + 18% GST for each squared off order.
For electricity contracts, the expiry date is one business day before the last business day of the contract month. If the last calendar day of the month is a holiday, then expiry moves to the business day before that. For example, if the contract month ends on Saturday and Friday is a business day, then Friday is the expiry day, and you can hold until 9 PM on Thursday. If Friday is also a holiday, then Thursday becomes the expiry day, and you can hold until 9 PM on Wednesday.
Why Zerodha squares off before expiry
Settlement prices are based on the Volume Weighted Average of the Day-Ahead Market Unconstrained Market Clearing Price (DAM-UMCP) for all calendar days of the expiry month. MCX electricity contracts use prices from India Energy Exchange (IEX), while NCO electricity contracts use prices from Power Exchange of India (PXIL). This methodology creates uncertain and volatile settlement prices that may significantly differ from trading prices, creating substantial risk for traders.
For detailed settlement procedures, download exchange circulars: