Delivery Margin Update: What's Changing for Long OTM Options on Expiry Day

What's changing

On 29 September 2026, Kotak Neo will apply a delivery margin on long Close-to-the-Money (CTM) option contracts, i.e. OTM contracts with strikes within 3% of the underlying share price, starting 12 PM on monthly expiry day.

Please note that delivery margin is already being applied to ITM options contracts currently. This additional change is on Close to the Money Long OTM Options contracts which run the risk of turning ITM at market close.

Example

Assume a stock is trading at ₹1,000 and you hold a put option with a strike price of ₹980. Since ₹980 is within 3% of ₹1,000, the position falls within the Close to the Money range. Full delivery margin will apply from 12 PM on expiry day. If sufficient funds are not available, the position may be auto-liquidated.

What you need to do

• Check your open long CTM option positions before every expiry day, especially in stocks prone to sharp intraday moves.
  
• If you do not wish to maintain the delivery margin, square off or roll over the position before 12 PM on monthly expiry day.
  
• Keep sufficient funds in your account through the full expiry session, not just at market open.
  
• Insufficient margin may lead to the position being squared off by our Risk Management team.
  

Why we're doing this

Stock F&O contracts in India settle physically, not in cash — since 2019, holding a stock derivative to expiry means actual delivery of shares, not a cash payout. Delivery margin on ITM contracts is already applied progressively in the days leading up to expiry, and this is not changing.

What's new here is the long OTM contracts near the money — those close enough to the strike that they could still turn ITM before the closing bell, particularly given how much can move in the final hours of an expiry session.

This isn't a penalty — it's pre-funding. If the stock does move into ITM territory by close, you're already covered instead of arranging funds or shares after the fact.