Physical settlement applies to eligible stock F&O contracts that are held close to expiry and may result in actual delivery of shares instead of only cash settlement.
Because delivery obligations increase as expiry approaches, the margin required for such positions also increases during the settlement week.
Physical settlement margin is the additional margin required when an eligible stock futures or options position is nearing expiry and may result in delivery of shares.
This applies mainly to stock F&O contracts. Index derivatives are generally cash-settled and do not result in physical delivery.
During the physical settlement week, margin requirements increase in phases as expiry approaches. This helps cover the risk and value of the potential delivery obligation.
| Timeline before expiry | Margin requirement |
|---|---|
| 4 days before expiry, E-4 | 10% of applicable delivery margin |
| 3 days before expiry, E-3 | 25% of applicable delivery margin |
| 2 days before expiry, E-2 | 45% of applicable delivery margin |
| 1 day before expiry, E-1 | 70% of applicable delivery margin |
| Expiry day, E | 100% of applicable delivery margin |
The margin increases because, as expiry gets closer, the position is more likely to move into physical delivery. If your position results in delivery, you may be required to either bring in funds to take delivery of shares or deliver shares from your demat account, depending on your position type.
The phased margin increase helps ensure that sufficient funds or collateral are available before the contract reaches expiry.
You should review your open stock F&O positions before the physical settlement period begins. Make sure you have enough margin available if you intend to carry the position closer to expiry.
If you do not want to take or give delivery of shares, you may consider closing or rolling over the position before the delivery margin requirement increases.
| Scenario | What happens |
|---|---|
| I do not maintain enough margin | Your position may be at risk of square-off as per FYERS’ risk policy. |
| My option becomes in-the-money near expiry | Physical settlement margin may apply because the contract can result in delivery. |
| I hold an index option until expiry | Physical settlement does not apply to index derivatives, as they are cash-settled. |
| I exit the position before expiry | Physical settlement delivery obligation will generally not apply once the position is closed. |
Physical settlement margin applies only to eligible stock F&O contracts that can result in delivery. Margin requirements may also change based on exchange circulars, risk conditions, and FYERS’ internal risk policy.
You should monitor your margin requirement closely during expiry week to avoid shortfall, penalties, or position square-off.
Last updated: 07 May 2026