Style Settlement For Free

An account settlement generally refers to the payment of an outstanding balance that brings the account balance to zero. It can also refer to the completion of an offset process between two or more parties in an agreement, whether a positive balance remains in any of the accounts.

For put index options, you cannot physically settle, as the index is not tangible. So, to settle index options, you can either exit your position through an offsetting trade in the market. You can also hold your position open until the option expires. Subsequently, the clearing house settles the trade.

As per a SEBI mandate, physical settlement is compulsory if a trader holds a position in any of the stock F&O contracts on an expiry date.In an F&O contract, when there is an open position that has not been squared off by its expiry date, physical settlement takes place.

F&O positions held till expiry used to be settled in cash on the basis of price of the underlying stock. However, since October 2019 the settlement takes place by giving or taking delivery of the actual shares.

Unlike shares of stock, which have a two-day settlement period, options settle the next day. 5 To settle on the expiration date, you have to exercise or trade the option by the end of the day on Friday.

Your stock options give you the right to exercise if and when you want to, but you're never obligated to do so. If you choose to exercise your stock options, you can hold on to your company shares or sell them.

In general, equity call options should only be exercised early on the day before an ex-dividend date, and then only for deep in-the-money options. For an American-style put option, early exercise is a possibility for deep in-the-money options.