How options settle at expiry

Settlement is what actually happens to your contract at expiry. These pages explain cash versus physical settlement, why index options are cash-settled while stock options are physically delivered, how in-the-money options are auto-exercised, and exactly how the settlement price is computed.

Settlement: At expiry, in-the-money options are automatically exercised and settled; out-of-the-money options expire worthless. Indian index options and futures are cash-settled against the final settlement price (the last-30-minute weighted average of the index). Single-stock derivatives are physically settled — actual delivery of shares.

Cash Settlement

Settlement type

Cash settlement means an expired derivative is settled by paying or receiving the net difference in money — the strike versus the final settlement pr…

→

Physical Settlement

Settlement type

Physical settlement means an in-the-money contract at expiry results in actual delivery of the underlying shares — full payment against full delivery…

→

ITM Settlement (In-the-Money at Expiry)

Outcome

ITM settlement is the outcome for an option that is in-the-money at expiry — it is auto-exercised and pays out exactly its intrinsic value, in cash f…

→

OTM Expiry (Out-of-the-Money at Expiry)

Outcome

OTM expiry is the outcome for an option that has no intrinsic value at expiry — it is not exercised, it simply lapses worthless, and the buyer loses …

→

The Exercise Process

Mechanism

The exercise process is the mechanical sequence by which an in-the-money option's right is converted into a final settlement — from the exchange fixi…

→

Auto-Exercise (Automatic Exercise)

Mechanism

Auto-exercise is the exchange's automatic conversion of any in-the-money option into a real settlement at expiry — the trader takes no action, and it…

→

Settlement Price

Key price

Settlement price is the official price the exchange uses each trading day to mark futures positions to market and value obligations — a daily figure,…

→

Final Settlement Price

Key price

The final settlement price is the single, official value — for Indian index derivatives, the weighted average of the underlying over the last 30 minu…

→

Frequently asked questions

What is the difference between cash and physical settlement?

In cash settlement, only the net profit or loss is exchanged in cash — no asset changes hands (used for all Indian index options and futures). In physical settlement, the actual underlying shares are delivered and paid for — mandatory for all Indian single-stock derivatives since 2019.

What happens if my option expires in-the-money?

An in-the-money option is automatically exercised by the exchange (auto-exercise). For index options you receive the cash difference between the strike and the final settlement price; for stock options, physical delivery of shares is triggered, which requires full contract-value funds or the shares.

How is the settlement price calculated?

For Indian index options, the final settlement price is the weighted average of the underlying index's prices during the last 30 minutes of trading on expiry day, as computed and published by the exchange. This reduces the impact of a single closing print.