What happens when a derivative contract expires?
When a derivative contract reaches its expiry date, it is settled according to the type of contract—either through cash settlement or physical settlement. Here's what you need to know about each:
1. Cash-Settled Contracts
This applies mostly to index derivatives (like Nifty or Bank Nifty):
- Upon expiry, profits or losses are calculated based on the final settlement price published by the exchange.
- There is no delivery of shares or commodities.
- The final outcome—profit or loss—is adjusted directly in your trading account.
2. Physically Settled Contracts
This applies to equity derivatives (i.e., F&O contracts based on individual stocks):
- At expiry, these contracts require actual delivery of shares.
- If you hold a long position, you must take delivery of the stock.
- If you hold a short position, you're required to deliver the stock.
- Margins will be blocked and obligations settled as per SEBI guidelines.
FYERS follows strict procedures in line with SEBI rules for physical settlement. To understand our specific approach, refer to: FYERS Policies on Physical Settlement
What If...
| Scenario | Explanation |
|---|
| I hold a Nifty options contract till expiry | It will be cash-settled. Your P&L will reflect in your account. |
| I hold a stock options contract till expiry | The contract will be physically settled. Ensure margin and stock obligations are fulfilled. |
| I’m not sure if the contract is cash or physically settled | Check the contract type and FYERS communication before expiry. |
Stay informed about upcoming expiry dates and settlement instructions. You can always track contract expiry updates for MCX and other segments via our: Notice Board Last updated: 28 Jun 2025
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