On Tuesday 16 Jun 2026 Nifty settled at 23,989.15, 10.85 points under the 24,000 strike. That gap decided two options. The 24,000 call, bought for Rs 9.55 a unit on 10 Jun, settled at nothing. The 24,000 put, bought for Rs 777.40, finished in the money by Rs 10.85, and its buyer still lost 98.6% of the premium. Nobody delivered anything and nobody had to decide anything. The exchange took one index level, did a subtraction on every strike and moved cash. That is expiry. It is accounting, and the rules are worth knowing before the last day, not during it.

3By the end you can

  1. Say how an index option and a stock future are each settled at expiry.
  2. Work out what an option pays at expiry, and why in the money is not profit.
  3. Name the STT charged on selling, on exercise and on futures, and what it is charged on.
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The idea, plainly

An option ends on its last trading day. On that day one settlement price is compared with each strike. What happens next depends on the contract.

At expiry an index contract moves cash and a stock contract moves shares

What happens at expiry: an index option is settled in cash if it finishes in the money and expires worthless otherwise, while a stock future, or a stock option in the money, ends in delivery of sharesDiagram with 6 boxes. Contract reaches its expiry to Index option; Contract reaches its expiry to Stock option or future; Index option to In the money: gap paid in cash; Index option to Otherwise: worthless; Stock option or future to In the money or a future: shares delivered.Contract reaches its expiryThe last trading dayIndex optionCash settledStock option orfuturePhysical deliveryIn themoney: gappaid in cashOtherwise:worthlessIn the moneyor a future:sharesdelivered
Index options are European, so they can be exercised only at expiry. Index futures are cash settled too. Stock contracts are physically settled by SEBI rule. Source: NSE Clearing, final exercise settlement; SEBI master circular on stock exchanges and clearing corporations, chapter 5. As of 16 Oct 2026.

Index options: European, automatic, in cash

A Nifty option is European: it can be exercised only at expiry, never before. NSE Clearing says final exercise is automatic for the strikes that finish in the money, and it is settled in cash. A call pays the index less the strike and a put pays the strike less the index. The buyer receives it and the seller pays it. At or out of the money the option is worthless: the premium is gone and nothing more is owed. The cash moves on the next day, and open positions cease to exist after the expiry day. So a buyer can hold an option overnight and through to expiry (can a buyer lose more than the premium?), and the worst case stays the premium, as module F13 shows.

On expiry day the settle column is just subtraction: calls struck below 23,989.15 pay, and so do puts struck above it

Cash settlement values of Nifty calls and puts around the 24,000 strike on expiry day 16 Jun 2026: calls below the index and puts above it settle at the gap, the rest at nothing
CallsStrikePuts
SettleSettle
189.1523,8000.00
139.1523,8500.00
89.1523,9000.00
39.1523,9500.00
Spot 23,989.15
0.0024,000ATM10.85
0.0024,05060.85
0.0024,100110.85
0.0024,150160.85
0.0024,200210.85

Shaded cells are in the money. Settle is the cash settlement value per unit: what the option paid at expiry.

Expiry day chain of 16 Jun 2026, rupees per unit. The index settled 10.85 points under the 24,000 strike, so that call settled at nothing and that put at the gap. The row tagged ATM is nearest the index close. Source: NSE end of day data, computed by RupeeCase. As of 16 Jun 2026.

The term this section turns on: Cash settlement

The term this section turns on: Cash settlementThe term this section turns on: Cash settlement. Cash settlement: Settling a contract by paying the money difference at expiry instead of delivering the underlying. Index options and futures are cash settled.Cash settlementSettling a contract by paying the moneydifference at expiry instead of delivering theunderlying. Index options and futures are...
From the module glossary; every term is in the Learn glossary too. Source: Module 14.6, Expiry and settlement: cash, physical, exercise and STT.

Which price settles

For the 16 Jun 2026 expiry in this lesson, the settlement price of an index contract was the index close on expiry day, built from the last half hour of trading in its stocks. That is the first period below. From 3 Aug 2026 the close comes from the cash market closing auction. SEBI's circular of 15 Oct 2026 starts a third method on 7 Dec 2026: the index worked out from the volume weighted prices of its stocks over the last 30 minutes of continuous trading, and expiring index contracts stop trading at 3:30 pm. So a settlement price always needs its date.

The way the settlement price is built changes on 3 Aug 2026 and again on 7 Dec 2026

  1. Index close from the last half hour

    SEBI master circular of 30 Dec 2024, chapter 5: the settlement price is the index close on expiry day, built from the volume weighted prices of the index stocks over the last half hour.

  2. Index close from a closing auction

    The cash market closing auction starts and the index close is built from the closing prices of its stocks (SEBI circular of 16 Jan 2026).

  3. Volume weighted price of the last 30 minutes

    The index is calculated from the volume weighted prices of its stocks over the last 30 minutes of continuous trading, and expiring index contracts stop trading at 3:30 pm (SEBI circular of 15 Oct 2026).

The first date is the master circular that sets out the first method, and the next two are when the new methods start. Stock contracts follow the same three periods: a volume weighted price of the stock across exchanges over the last 30 minutes, then the closing auction price, then that volume weighted price again. Source: SEBI master circular of 30 Dec 2024 and SEBI circulars of 16 Jan 2026 and 15 Oct 2026. As of 15 Oct 2026.
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Watch in the terminal: what do entry, last price and weight mean? A short tutorial on sample data.

Stock options and futures: delivery

Stock derivatives are different (what physical settlement means). SEBI made physical settlement mandatory for them, and every stock in F&O has settled this way since Oct 2019. A future still open at expiry turns into a purchase of the shares for the long and a sale for the short. A call that finishes in the money becomes a purchase at the strike and a put a sale. The money is the full contract value, not the margin. On 10 Jun 2026 one lot of one Nifty 50 stock's June future had a contract value of Rs 6.3 lakh. A position that is not meant to end in delivery has to be closed before expiry. For the 16 Jun 2026 expiry the settlement price of a stock contract was the volume weighted average price of the stock over the last 30 minutes of expiry day, across exchanges. From 3 Aug to 6 Dec 2026 it is the closing auction price, and from 7 Dec 2026 the 30 minute average again.

STT at expiry

STT on options is charged on selling. At the rates in force from 1 Apr 2026, an option sold pays 0.15% of the premium when it is sold. An option that finishes in the money and is exercised pays a second STT, 0.15% of the intrinsic value, charged to the buyer. A future sold pays 0.05% of the price. Until 31 Aug 2019 the exercise STT was charged on the whole settlement price, which is where the old warning about an STT trap comes from. Since then it is charged on the intrinsic value only.

Two terms to hold on to from 14.6

Two terms to hold on to from 14.6Two terms to hold on to from 14.6. Physical settlement: Settling a contract by delivery: the long pays the full value and receives the shares, and the short delivers them. SEBI requires it for stock derivatives. European option: An option that can be exercised only at expiry. Nifty options are European.Physical settlementSettling a contract by delivery: the long paysthe full value and receives the shares, andthe short delivers them. SEBI requires it...European optionAn option that can be exercised only atexpiry. Nifty options are European.
From the module glossary. Source: Module 14.6, Expiry and settlement: cash, physical, exercise and STT.

The expiry day itself

Since 1 Sep 2025 Nifty weekly options expire on Tuesday, and the monthly on the last Tuesday of the month. If that Tuesday is a trading holiday the expiry moves to the previous trading day. On expiry day itself, short index options that expire that day carry an extra 2% of notional value as extreme loss margin (since 20 Nov 2024), the index level times 65 units. A calendar spread gets no offset on its expiring leg (since 1 Feb 2025).

Worked example: three options settle on 16 Jun 2026

One lot of 65 units each, bought on 10 Jun 2026 at the settlement premium and held to expiry. The settlement is 23,989.15. The buyer's result is intrinsic value less premium, times 65. The exercise STT is 0.15% of the intrinsic value, times 65, and it falls on the buyer.

Per unit unless stated23,250 call24,000 call24,000 put
Paid on 10 Jun163.609.55777.40
Settles on 16 Jun739.150.0010.85
Buyer's result per lot, Rs37,411−621−49,826
Exercise STT per lot, Rs72.070.001.06

A put can finish in the money and still lose: it must settle under its breakeven

Payoff at expiry of one bought Nifty 24,000 put: it loses while the index settles above its breakeven even though the put finishes in the money below the strikePayoff of the position at expiry. Breakeven at 23,223. Maximum profit in the range ₹75,062, maximum loss ₹50,531; at least one end of the range is still sloping, so the true extreme lies outside it. Spot 23,215.Profit or loss, ₹ for the whole position−₹50,000−₹25,000₹0₹25,000₹50,000₹75,00022,50023,00023,50024,000Nifty at expirySpot 23,215BE 23,223Max loss ₹50,531No cap
One lot of the 24,000 put bought for Rs 50,531 on 10 Jun 2026. It breaks even at 23,222.60, so a settlement anywhere between 23,222.60 and the strike finishes in the money and still loses. Source: NSE end of day data, computed by RupeeCase. As of 10 Jun 2026.
Read one more paragraph, 122 words

The 23,250 call gained Rs 37,411 and paid Rs 72.07 of exercise STT on it. The 24,000 call expired worthless and owes no exercise STT. Its seller kept all of Rs 621 a lot, before charges. The 24,000 put is the one to study. It finished in the money, so its buyer was paid 10.85 a unit and charged STT of Rs 1.06 on that. The buyer was still Rs 49,826 down on the position. STT is charged on intrinsic value whether or not the trade made money. The seller of the 23,250 call paid its own STT earlier, when it sold: Rs 15.95 on the premium. The cost calculator below adds the exchange charges, the SEBI fee, stamp duty and GST.

The common mistake

The belief: An option that expires in the money makes money. In the money is a statement about intrinsic value alone. Profit needs the settlement to beat the price paid, and charges come on top. The 24,000 put cost Rs 777.40 on 10 Jun, when Nifty was far below the strike. By 16 Jun the index had climbed to within 10.85 points of that strike. The put was still in the money and had lost almost everything. Compare the settlement with the premium paid, not with the strike.

Key takeaways

  • Index options are European, settled in cash, and exercised automatically in the money.
  • A call pays the index less the strike, a put the strike less the index.
  • In the money is not profit: the settlement must beat the premium paid.
  • Stock futures and options end in delivery, at the full contract value.
  • STT is 0.15% of premium on sale and 0.15% of intrinsic value on exercise.
  • The settlement price method changed on 3 Aug 2026 and changes again on 7 Dec.

Where this section sits in module 14.6

Where this section sits in module 14.6Where this section sits in module 14.6. 1. The idea, plainly 2. Worked example: three options settle on 16 Jun 2026 3. The common mistake 4. Key takeaways01The idea, plainly02Worked example: three optionssettle on 16 Jun 202603The common mistake04Key takeaways
Sections 1 to 4 of 4; the highlighted one is next. Source: Module 14.6, Expiry and settlement: cash, physical, exercise and STT.

Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study