The National Commodity & Derivatives Exchange Limited (NCDEX) on December 05, 2024, issued a notification regarding the Margins for Options on Futures Contracts.
NCCL has issued guidelines for risk management measures in the options on futures contracts segment, effective immediately. Key provisions include:
Initial Margins (IM): Risk-based margins covering at least 99% VaR with a minimum Margin Period of Risk (MPOR) of 4 days. Premium for options buyers will be blocked as margins.
Extreme Loss Margin (ELM): Minimum 1% ELM on gross open positions for short options.
Spread Margin Charges: Calendar spread charges apply, with a maximum margin benefit of 50% on each leg for eligible positions.
Mark to Market (MTM): Gains/losses for options positions will not be settled in cash but factored into margin requirements.
Pre-expiry Margin: Margins progressively increase to 100% near expiry for At the Money (ATM) and In the Money (ITM) options.
Margin Sensitization Report: Generated 2 days prior to pre-expiry margin application to inform members.
Lean Period Margin: Additional 2% margin for contracts expiring during lean periods.
Other Margins: Additional and special margins may be levied as required.
Client-Level Margining: Margins will be applied at the individual client level.
These measures aim to ensure robust risk management and address price volatility in the commodity derivatives market.
[Notification No. NCCL/RISK-066/2024]
