Modification in no. of Strikes in Natural Gas and Natural Gas Mini Options Contracts

Commodity

Existing Strikes

Modified Strikes

Applicability

Contract Specification

Natural gas Options on Futures (1250 MMBtu)

30-1-30

40-1-40

Running and yet to be launched contracts

Annexure 1

The Exchange, at its discretion, may introduce additional strikes, if

required.

The Exchange, at its discretion, may introduce additional strikes, if

required.

Natural gas Mini Options on Futures (250 MMBtu)

30-1-30

40-1-40

Running and yet to be launched contracts

Annexure 2

The Exchange, at its discretion, may introduce additional strikes, if

required.

The Exchange, at its discretion, may introduce additional strikes, if

required.

Symbol

NATURALGAS

Underlying

Underlying shall be Natural Gas Futures contract traded on MCX

Description

Option on Natural Gas Futures

Option Type

European Call & Put Options

Contract Listing

Contracts will be available as per the Contract Launch Calendar

Contract Start Day

The next business day immediately after the expiry of the near month

Futures Contracts

Expiry Day (Last

Trading Day)

Two business days prior to the Expiry day of the underlying Futures

Contract

Trading

Trading Period

Mondays through Fridays

Trading Session

Monday to Friday: 9.00 a.m. to 11.30 / 11.55 p.m.*

* based on US daylight saving time period

Trading Unit

One MCX Natural Gas Futures Contract

Underlying

Quotation/Base Value

Rs. / MMBtu

Strikes

40 In-the-money, 40 Out-of-the money and 1 Near-the-money (81CE and 81 PE). The Exchange, at its discretion, may introduce additional strikes, if required.

Strike Price

Intervals

Rs. 5

Base price

Base price shall be theoretical price on Black 76 option pricing model

on the first day of the contract. On all other days, it shall be previous

day's Daily Settlement Price of the contract.

Tick Size (Minimum Price Movement)

Rs. 0.05

Daily Price Limit

The upper and lower price band shall be determined based on

statistical method using Black76 option pricing model and relaxed considering the movement in the underlying futures contract. In the event of freezing of price ranges even without a corresponding price relaxation in underlying futures, if deemed necessary, considering the volatility and other factors in the option contract, the Daily Price Limit shall be relaxed by the Exchange.

Margins

The Initial Margin shall be computed using SPAN (Standard Portfolio Analysis of Risk) software, which is a portfolio based margining system. To begin with, the various risk parameters shall be as under:

1. Price Scan Range - 3.5

2. Volatility Scan Range - 10 % (or such other % as prescribed by MCXCCL based on risk framework)

C. Short Option Minimum Margin - 10% (or such other margin as

prescribed by MCXCCL based on risk framework)

D. Extreme Loss Margin - Minimum 1% (or such other margin as prescribed by MCXCCL based on risk framework)

E. Premium of buyer shall be blocked upfront on real time basis The Margin Period of Risk (MPOR) shall be at least three days (or such other margin period of Risk (MPOR) as prescribed by MCXCCL based on risk framework).

Parameters would be reviewed and changed, if required.

Premium

Premium of buyer shall be blocked upfront on real time basis.

Margining at client Level

Initial Margins shall be computed at the level of portfolio of individual

clients comprising of the positions in Futures and Options Contracts on each Commodity

Real time

computation

The margins shall be recomputed using SPAN at Begin of Day, 9.30 am, 11.00 am, 1.00 pm, 3.00 pm, 5.00 pm, 7.00 pm, 8.30 pm, 10.30

pm and End of Day.

Mark to Market

The option positions shall be marked to market by deducting / adding

the current market value of options positions (positive for long options and negative for short options) times the number of long / short options in the portfolio from / to the margin requirement. Mark to Market gains and losses would not be settled in Cash for Options Positions.

Risks pertaining to

option that devolve into futures on expiry

1. In the initial phase, a sensitivity report shall be provided to

   members of the impending increase in margins at least 2 days in advance. The mechanism shall be reviewed and if deemed necessary, pre-expiry option margins shall be levied on the buy / sell / both positions during last few days before the expiry of Option Contract.

2. The penalty for short collection / non collection due to increase in initial margins resulting from devolvement of

options into futures shall not be levied for the first day.

Additional and/ or

Special Margin

At the discretion of the Exchange when deemed necessary

Position Limits

Maximum Allowable Open Position

Position limits for Options would be separate from the position limits applicable on Futures Contracts.

For individual clients: 120,00,000 MMBtu or 5% of the market wide open position, whichever is higher for all Natural Gas Options Contracts combined together.

For a member collectively for all clients: 12,00,00,000 MMBtu or 20% of the market wide open position, whichever is higher for all Natural Gas Options Contracts combined together.

Upon expiry of the Options Contract, after devolvement of Options position into corresponding Futures positions, open positions may exceed their permissible position limits applicable for Future Contracts. Such excess positions shall have to be reduced to the permissible position limits of Futures Contracts within two trading

days.

Settlement

Settlement of premium/Final Settlement

T+1 day

Mode of settlement

On expiry of Options Contract, the open position shall devolve into underlying futures position as follows: -

• long call position shall devolve into long position in the underlying futures contract

• long put position shall devolve into short position in the underlying futures contract

• short call position shall devolve into short position in the underlying futures contract

• short put position shall devolve into long position in the underlying futures contract

All such devolved Futures positions shall be opened at the strike price of the exercised Options