Stock Options on WebNotes

Stock-option restrictions near expiry

Sun, 21 Jun 2026 00:00:00 +0000

Stock options are restricted near expiry because all single-stock derivatives on the National Stock Exchange are compulsorily physically settled on expiry, and an in-the-money stock option that is held to expiry converts into an obligation to give or take delivery of the underlying shares. To make traders fund that obligation in advance, the exchange applies a physical-delivery margin ramp on in-the-money stock options starting four days before expiry, and Zerodha layers its own controls on top: it blocks fresh deep-in-the-money and illiquid stock-option positions near expiry and runs square-off-only behaviour where appropriate. This article explains the margin ramp day by day, why the blocks exist, and how to avoid both.

How to avoid physical settlement (manual close-out)

Tue, 12 May 2026 00:00:00 +0000

Physical settlement of in-the-money stock options and stock futures on NSE, mandated by SEBI since 2018, creates share delivery and receipt obligations that most retail traders do not want. The practical alternative is to manually close out the position before expiry. This guide explains the close-out deadline, the cost advantage of closing before settlement, and the exact steps to exit cleanly.

For a full explanation of what happens if you allow physical settlement to proceed, see How to physically settle an in-the-money option .

How to physically settle an in-the-money option

Tue, 12 May 2026 00:00:00 +0000

Physical settlement means that an in-the-money stock option or stock futures contract, if held to expiry on NSE, results in the actual delivery of the underlying shares rather than a cash payment of the difference between the option price and the settlement price. SEBI mandated physical settlement for all NSE stock derivatives via a circular in April 2018. This guide explains what happens, what your obligations are, how to confirm settlement, and what costs arise.