Index Initials Settlement For Free

Index options are always cash-settled and are typically European-style options, meaning they settle only on the date of maturity and have no provision for early exercise.

While the stock market securities now adhere to T+1 cycle, the same transaction takes one day longer in case of mutual fund units. Earlier it used to take a minimum of three days, but with effect from February 1, the settlement cycle was cut down by one day. This means now it will take T+2 for the transaction to close.

Most options and futures contracts are cash-settled. However, an exception is listed equity options contracts, which are often settled by delivery of the actual underlying shares of stock.

They are settled in cash on a daily basis, which means that investors and traders pay or collect the difference in value daily. Index futures can be used for a few reasons, often by traders speculating on how the index or market will move, or by investors looking to hedge their position against potential future losses.

With any futures contract, there is the agreement to pay a specific price on a set date (the expiration date). Index futures are purely cash-settled since it is not possible to physically deliver an index, and the settlements happen daily, on a mark-to-market basis.

Index options are typically European style and settle in cash for the value of the index at expiration. Like all options, index options will give the buyer the right, but not the obligation, to either go long (for a call) or short (for a put) the value of the index at a pre-specified strike price.

On the expiry of the futures contracts, NSE Clearing marks all positions of a CM to the final settlement price and the resulting profit / loss is settled in cash. The final settlement of the futures contracts is similar to the daily settlement process except for the method of computation of final settlement price.