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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Clearing and Settlement System

Under the SEBI framework, how are stock index and stock options and futures contracts on the Indian exchanges finally settled on expiry?

Stock derivatives are settled by physical delivery of shares at expiry, while index derivatives are cash settled in rupees. An index cannot be delivered physically, so the difference is settled in cash.

  1. AStock derivatives are settled by physical delivery of shares; index derivatives are cash settledCorrect
  2. BAll derivatives are cash settled in rupees
  3. CAll derivatives are settled by physical delivery of the underlying
  4. DIndex derivatives are physically settled; stock derivatives are cash settled

Explanation

Index derivatives cannot be delivered physically, so they are cash settled. Stock derivatives in India are physically settled at expiry, with delivery obligation arising on open positions as per the exchange framework.

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