--- title: "What is physical settlement in stock F&O | RupeeCase" description: "Since the October 2019 expiry, a stock option that is in the money at expiry." source_url: "https://www.rupeecase.com/learn/questions/physical-settlement-stock-fo" --- A stock F&O position still open at expiry turns into a delivery Steps for a stock future, or an in the money stock option, still open at expiry. This is a rule diagram and carries no market figures. Source: SEBI circulars on physical settlement of stock derivatives, Apr 2018 and Dec 2018; NSE rules. As of 1 Apr 2026. Since the October 2019 expiry, stock futures and options settle by delivery of shares, not by a cash difference. A stock option in the money at expiry, or a stock future still open at expiry, ends in a delivery. SEBI started the change in phases with its circular of 11 Apr 2018, and its circular of 31 Dec 2018 moved the last cash settled stocks over by October 2019. Index options are different: they settle in cash. Take a stock call and a stock future first. The buyer pays for the shares. A long call that is in the money at expiry takes delivery of the lot at the strike, and a long future takes delivery at the settlement price. That needs the money for the whole lot, not a margin, ready at settlement. The seller hands over the shares, so a short call that is in the money must deliver the lot, and a seller who does not hold the shares has an uncovered delivery to meet. A put runs the other way round. The buyer of an in the money put delivers the shares and receives the strike price, and the seller of the put pays for the shares. A put buyer who holds no shares has the uncovered delivery. The charges change too. Stamp duty applies to physically settled stock derivatives on the final settlement value, and STT applies to an option that is exercised, on its intrinsic value. The chart lists the steps in order. **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](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) What is physical settlement in stock F&O?Since the October 2019 expiry, a stock option that is in the money at expiry, or a stock future still open at expiry, settles by delivery of shares rather than a cash difference. For a call or a future the buyer pays for the shares and the seller delivers them, and a put reverses that. LGo deeper ## Where Learn teaches this. [Go deeperExpiry and settlement: cash, physical, exercise and STT8 min, Beginner](/learn/path-14/module-14-6-expiry-and-settlement) SSources ## Go to the source. 3 sources, SEBI the most cited The publisher of each source listed below. Source: Module undefined source list. 1. [SEBI circular, review of framework for stocks in derivatives segment (11 Apr 2018)](https://www.sebi.gov.in/legal/circulars/apr-2018/review-of-framework-for-stocks-in-derivatives-segment_38629.html) SEBI 2. [SEBI circular, physical settlement of stock derivatives (31 Dec 2018)](https://www.sebi.gov.in/legal/circulars/dec-2018/physical-settlement-of-stock-derivatives_41482.html) SEBI 3. [NSE, equity derivatives contract specifications (expiry, lot size, settlement)](https://www.nseindia.com/static/products-services/equity-derivatives-contract-specifications) NSE ?Questions people ask ## Related questions. 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