Hi @tanmay_ray, for stock options, if you retain your position till expiry without squaring it off, it will be subject to physical settlement. This means:
- You will receive shares if you have a long position.
- You will need to deliver shares if you have a short position.
- If you have long and Short positions, they will be netted off to offset delivery obligations. For example, if you have a Call option, sell, and Future Buy Position, they will get netted off. However, this is only if your option position is ITM. If it becomes OTM, physical delivery will apply to your futures position. Make sure to monitor your positions closely to avoid any delivery-related issues.
For index options, there’s no physical settlement involved as these are cash-settled. If positions are not squared off before expiry, the exchange will handle the settlement automatically based on the closing price.
This approach ensures you avoid complications related to physical delivery while trading derivatives. Check out our blog to learn more about policies on the physical settlement of stock derivatives.