SEBI Proposes Changes to ITM Single-Stock Options Ahead of Expiry

The Securities and Exchange Board of India (SEBI) has proposed a change to the handling of in-the-money (ITM) single-stock options. Currently, ITM options are automatically exercised and converted into physical delivery obligations based on the last 30 minutes' volume-weighted average price (VWAP) on the expiry day.

The proposed change suggests that instead of resulting in physical delivery, ITM options will devolve into stock futures one day prior to expiry, referred to as E-1 day. This adjustment aims to streamline the process and allow traders to manage their positions more effectively.

On the actual expiry day, known as E day, the resultant stock futures positions can then be closed, providing greater flexibility for market participants.

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