How Additional Physical Delivery Margin on Long In-the-Money Stock Options Contract (ITM) works during Friday (Friday before expiry Thursday) to Expiry Thursday.

Futures and Options on underlying equity stocks are settled by Physical delivery of shares. Futures and Options on indices are settled in cash ( cash here means non delivery through banking channel and not actual physical cash). Futures and options on TCS , Reliance etc are example of Stock Futures and Options as underlying is individual scrip. Futures and Options on indices ( index) on Nifty50 , Bank Nifty, Fin Nifty etc are example of Index Futures and Options as underlying is basket of scrip and not individual stocks.
Additional Margin to be charged for Physical settlement of Stocks Futures and Options:

Due to compulsory physical settlement in Stock Futures and Stock Options, Clearing Corporation face risk for collecting higher margin at the time of expiry date.
Exchange/ Clearing Corporation charges physical delivery margin as a percentage of Underlying stock which is levied from expiry minus 4 trading days for long ITM ( In the Money) options ( starting Friday before expiry Thursday and in case of any trading holiday in between than those earlier than Friday as rule is 4 trading minus expiry day ). To handle the same in Trading Application, additional margin will be charged for stock Option Net Long ITM contracts as below:-

For E-4 days 10% of (VAR + ELM + Adhoc Margin of Underlying Asset * Qty * Strike Price)
For E-3 days 25% of (VAR + ELM + Adhoc Margin of Underlying Asset * Qty * Strike Price)
For E-2 days 45% of (VAR + ELM + Adhoc Margin of Underlying Asset * Qty * Strike Price)
For E-1 day 70% of (VAR + ELM + Adhoc Margin of Underlying Asset * Qty * Strike Price)
E day 100% of (VAR + ELM + Adhoc Margin of Underlying Asset * Qty * Strike Price)

Above will be over and above of Premium charges. It is applicable only for stock Option Net Long ITM contracts. For identification of ITM contracts, beginning of the day file will be considered and again End of the file will be considered. Due to considering last file , which comes after market closes, options which are not ITM may become ITM post market close or options which are ITM may become OTM( Out of Money).
Optionally, ProStocks on last two days depending on volatility etc certain percentage say +/- 2 % would be applied to determine ITM e.g. Call of Strike Price Rs 100 would be treated as ITM when underlying is at or above Rs 98. Such margin may be applied on intraday, CO and BO position also depending on volatility, risk perceived at the discretion of the ProStocks.
Futures and Options on indices are not subject to above additional margin as they are settled non delivery. On Expiry day Futures and Options are settled on settlement prices which are volume weighted close price of underlying. Settlement prices are announced post close of market.

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