Module 4   Futures Trading (Video Series)Chapter 6

Settlement

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6.1 – How are positions settled?

Until recent times, trading in equity futures and options was cash settled in India. This means that upon expiry of the contract, buyers or sellers had to settle their position in cash without having to take delivery of the underlying security. In this video, we will learn about how positions are settled now in India and deep dive into the concept of “Physical Settlement”.

In the following video, we will learn about open interest.

We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.


No key takeaways from this video 🙂

8 comments

  1. Varun says:

    What will happen to my balance/trade if I don’t close by position during end of the expiry day

  2. Udhav says:

    Hi Karthik,
    As it is said in the video, that as we approach the expiry date of the futures contract, the margin required increases. Therefore, will the margin become equal to the total contract size of our position on the day of the expiry, since we have to ensure physical delivery on the expiry date?

    • Karthik Rangappa says:

      Yes, it goes up considerably, almost to the extent on contract value, depending on the contract under consideration.

  3. Vasanth says:

    I sold IGL 400 PE @ 3 and currently somewhere at 9 due to sharp fall. Lets say if it goes further down to 380 and by the expiry how the settlement happens exactly. Will I get the stock price at 380 or 400 as I sold the 400 contract. Also how the losses will be adjusted. Please explain with some examples.

    • Karthik Rangappa says:

      Yes, since its an ITM option, short PUT will result in taking delivery of the stock. Hence you need to have the necessary margins in your account.

  4. Lirson Ronghang says:

    Please explain me about currency option settlement. For example,

    USDINR CONTRACT EXPIREY DATE OCTOBER 30 , 2021
    SPOT PRICE ON EXPIRY 77
    I SOLD 78 Put , 1 lot
    My question is that, how much I need to pay for settlement on expiry.

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