Stock F&O contracts settle by physical delivery — if a contract is in the money at expiry, you give or take delivery of the full lot of shares. To keep clients out of deliveries they can't fund, Rupeezy's RMS blocks fresh buy (long) positions in stock options during the last two trading days before expiry, and can square off open positions that risk delivery, from 10:30 AM on expiry day, without further intimation.
Why are fresh stock option buys blocked near expiry?
An option that looks cheap and out-of-the-money two days before expiry can move into the money by expiry evening. At that point it's no longer a premium-sized bet — it becomes an obligation worth the full lot value of the underlying shares. Since most buyers don't hold anywhere near that amount, RMS refuses fresh long positions in stock options in the final two trading days of the contract rather than let that risk build up.
What happens to positions I keep open into expiry?
- Keep the account funded for delivery. For a position you intend to carry, maintain funds of roughly buy quantity × the current price of the underlying stock — that's the scale of the delivery obligation, not the premium you paid.
- RMS watches strikes near the market price. Out-of-the-money and at-the-money strikes close to the last traded price may be squared off by RMS, since they're the ones that can flip into the money and end in physical delivery.
- Close it yourself before 10:30 AM on expiry day. After that, RMS can square off stock futures and option positions at its discretion, without intimation. If you want to stay in the trade, roll over to the next month's contract instead — fresh positions in the next expiry aren't blocked.
For what the expiry session itself looks like, see what happens on expiry day.
What if RMS can't square off my position?
If a position can't be squared off — the contract is illiquid, the stock is stuck at a circuit, or there's simply no counterparty — it goes to compulsory physical delivery, and the costs, margins, and risks of that settlement are yours. Rupeezy also reserves the right to liquidate a contract without letting it convert to physical settlement.
Are commodity contracts restricted too?
Yes, commodity delivery contracts have their own version of these rules:
- Commodity futures in delivery-type contracts are blocked for fresh trading five days before the staggered delivery period begins.
- Commodity options are allowed only intraday once the tender period starts — overnight positions aren't permitted.
Things to keep in mind
- Losses arising from an RMS square-off near expiry are your responsibility — the square-off protects you from a delivery obligation, not from the market.
- These blocks apply to stock F&O. Index options settle in cash, so they don't carry physical-delivery restrictions.
- The full RMS Policy is available with Rupeezy's other policies and procedures.