Kotak Securities withdraws auto square off option on expiry day

Brokerage firm Kotak Securities has removed its auto-square off for option traders in intraday products like super multiple and margin intraday square-off (MIS) on expiry days available through its platform.

The removal will give clients flexibility to square of the open position till market closure at 3.30 pm or allow it to expire. With the extended timelines, clients now will get an alternative to let the position expire at market close, helping them in saving brokerage costs on the second leg of their option trade.

By withdrawing auto square off on expiry day for expiring contracts, clients trading through Kotak Securities platform will no longer have to exit their Nifty or Bank Nifty option trade at 3:10 pm in intraday products such as MIS and Super Multiple.

As a practice on F&O expiry day, brokerages used to automatically square off traders' position after 3:10 pm and before market close of 3:30 pm for trades placed using intraday products. This typically take away traders' opportunity to earn better premium. However, now traders on Kotak Securities platform can hold on to their intraday option positions till market closing. Allowing the contracts to expire rather than square off, traders will get additional two-fold benefit, one from option premium and other benefit of the brokerage cost.

For instance, if a trader is selling 10 lots of Nifty at ₹75 per lot on the expiry day. On this, the trader pays a brokerage of ₹20. Now, at 3:10 pm the trader’s option is at-the-money and is priced at ₹7.5 per lot. In this case if there is an auto square off, the trader closes ₹95 per lot, as he/she pays extra brokerage of ₹20 for selling as well as loses ₹7.5 per lot on the premium. In case of no auto square off the trader will be able to save on the brokerage as well as premium as usually expiring options on expiry date.

Markets traded volatile on the day of monthly F&O expiry on Thursday. The BSE Sensex ended at 51,115.22, up 97.70 points or 0.19%. The Nifty still could not hit record high. The 50-share closed at 15,337.85, up 36.40 points or 0.24%.