In October 2019, Sebi mandated physical settlement of stock derivative positions that are open on expiry date
Lately, some traders in the options market have burnt their hands due to the physical settlement of shares on the expiry date. Here, we delve into what these rules are and how the ‘right’ of the option buyer to buy or sell has now become the ‘liability’ to take or give delivery of the shares. Options writing is mostly done by institutions and HNIs (high net worth individual), thus our story is limited to impact on option buyers.
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