Modification in Number of Strikes of Crude Oil Options on Futures (100 bbls) and Crude oil Mini Options on Futures (10 bbls) Contracts

Commodity

Existing Strikes

Modified Strikes

Applicability

Contract Specification

Crude oil Options on Futures (100 bbls)

25-1-25

The Exchange, at its

discretion, may introduce additional strikes, if required.

75-1-75

The Exchange, at its

discretion, may introduce additional strikes, if required.

Running and

yet to be launched contracts

Annexure 1

Crude oil Mini Options on Futures (10 bbls)

25-1-25

The Exchange, at its

discretion, may introduce additional strikes, if required.

75-1-75

The Exchange, at its

discretion, may introduce additional strikes, if required.

Running and

yet to be launched contracts

Annexure 2

Symbol

CRUDEOIL

Underlying

Underlying shall be Crude Oil Futures contract traded on MCX

Description

Option on Crude Oil 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 Crude Oil futures contract

Underlying Quotation/

Base Value

Rs. Per barrel

Underlying Price Quote

Ex - Mumbai (excluding all taxes, levies and other expenses)

Strikes

75 In-the-money, 75 Out-of-the-money and 1 Near-the-

money (151 CE and 151 PE). The Exchange, at its discretion, may introduce additional strikes, if required.

Strike Price Intervals

Rs. 50

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. 0.10

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 Standard Deviation (3.5 sigma)

2. Volatility Scan Range - Minimum 5% or as decided by MCXCCL from time to time. For applicable VSR refer latest circulars issued by MCXCCL.

3. The Short Option Minimum Margin (SOMM) and Margin Period of Risk (MPOR) shall be in accordance with SEBI Circular no. SEBI/HO/CDMRD/DRMP/CIR/P/2020/15 dated January 27, 2020. For applicable SOMM and MPOR refer latest circulars issued by MCXCCL from time to

   time.

4. Extreme Loss Margin - Minimum 1% (to be levied only on short option positions)

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

6. For Additional Margin refer latest circulars issued by MCXCCL from time to time.

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: 9,60,000 barrels or 5% of the market wide open position, whichever is higher for all Crude Oil Options contracts combined together.

For a member collectively for all clients: 96,00,000 barrels or 20% of the market wide open position, whichever is higher for all Crude Oil 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

Exercise Mechanism at expiry

All In the money (ITM)# option contracts shall be exercised automatically, unless 'contrary instruction' has been given by long position holders of such contracts for not doing so.

The ITM option contract holders, who have not submitted contrary instructions, shall receive the difference between the Settlement Price and Strike Price in Cash as per the settlement schedule.

In the event contrary instruction are given by ITM option position holders, the positions shall expire worthless.

All Out of the money (OTM) option contracts shall expire worthless.