Mumbai: BSE Ltd said on Friday that it will shift from delivery-based settlement of stock futures and options (F&O) to cash settlement starting 26 April.
“All single stock futures and options contracts, i.e. monthly and weekly expiry contacts expiring till April 25, 2013, will continue to have delivery-based settlement. There will be no change in other contract specifications like contract size, strike intervals, number of strikes for options, expiry day, and calculation of settlement price,” the exchange said in a release.
A derivative instrument is said to be physically settled if the underlying asset is delivered for a specified payment earlier agreed upon at the time of entering the contract.
Under cash settlements, the underlying asset is not physically delivered, but is settled by paying the difference between the price of the underlying asset and the forward contract’s value at maturity.