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Market regulator Sebi has decided to simplify the exercise mechanism of option contracts on commodity futures.
On expiry, all ‘in the money’ option contracts will be exercised automatically, unless ‘contrary instruction’ has been given by long position holders, said Sebi.
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All ‘out of the money’ option contracts shall expire worthless, it added.
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Earlier, all the ‘close to money’ contracts could also be exercised on explicit instructions from long position holders.
However, with the recent changes, there will be no ‘close to money’ series of options. All ‘out of the money’ and ‘at the money’ contracts go worthless.
“All exercised contracts within an option series shall be assigned to short positions in that series in a fair and non-preferential manner,” it said.
The circular will come into effect from new series of commodity derivatives launched on or after February 1, it said.
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