As per a SEBI mandate, physical settlement is compulsory if a trader holds a position in any Stock F&O contracts on the expiry date.

What is physical settlement?

In a Stock F&O contract, when there is an open position that has not been squared off by its expiry date, physical settlement takes place. This implies they have to physically give/take delivery of Stocks to settle the open transactions instead of settling them with cash.

Examples of physical settlement:

1. Future:

Long positions: If you decide to physically settle, you need to have a complete contract value of Rs. 5 lakhs.

Short positions: If you decide to physically settle, you need to have the holdings of 250 quantity of Reliance and Rs. 1 lakh margin money till the expiry date.

2. Option:

Long Call (CE) Options: To go for physical settlement, you need to maintain a free ledger balance of Rs 5 Lakh in your account.

Long Put (PE) Options: If you wish to go for physical settlement, you need to provide the Stocks (shares) equal to the lot quantity positioned to be available in the Demat account.

Process for Physical Settlement on Upstox:

To opt for physical settlement on Upstox, you need to provide your consent first.

Visit the 'Profile' section on your Upstox account on our App/Web before EOD on Tuesday, 28th September 2021.

Plan your trades considering no fresh positions can be traded in the current September 2021 expiry F&O contracts from Wednesday, 29th September 2021 onwards.

Impact on positions:

Your position will be automatically squared off if:

You have not provided consent for physical settlement.

You provided consent and do not have Ledger Value/holdings available for physical settlement.

Delivery margins:

Delivery margins would be applicable on all existing long ITM stock option positions in a staggered manner.

Brokerage in Physical settlement:

Brokerage for physically settled contracts (Futures & Options) will be 0.25% of the physical settled value. For netted-off positions, brokerage will be 0.1% of the physical settled value. All physically settled contracts will also carry an applicable Exchange charge.