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For NSE equity derivatives, futures are marked to market every trading day and their final profit or loss is settled in cash at expiry. Options work differently: buyers pay a premium for a right, while writers accept an obligation; in-the-money options are automatically exercised at expiry. The exact settlement form for options needs special care: NSE’s official pages conflict on whether some options, including Nifty 50 options, are settled in cash or through physical delivery.
How futures and options differ
| Feature | Futures | Options |
|---|---|---|
| What the position represents | A futures position is marked to market daily; gains and losses are settled through clearing. | The buyer pays a premium for a right without an obligation. The writer receives the premium and takes on an obligation. |
| During the contract | Daily profit or loss is calculated against the applicable settlement price and settled through clearing, normally T+1 under NSE’s described procedure. | Premium amounts are cash settled, with daily premium settlement described as T+1. |
| At expiry | The final profit or loss is calculated using the final settlement price, settled in cash, and the position ceases to exist. | In-the-money contracts are automatically exercised. The settlement form depends on the specific contract, and official NSE pages do not agree on the treatment of some options. |
| Risk shape | Both long and short positions face daily mark-to-market cash flows and a final cash settlement. | A purchased option’s payoff differs from a written option’s obligation. Exercise, assignment and any delivery requirement can also matter at expiry. |
Do futures have daily settlement?
Yes. NSE says futures positions are marked to market at the end of each trading day. The calculation compares the trade price or the previous day’s settlement price with that day’s settlement price. After settlement, the position resets to the daily settlement price. Pay-in and pay-out are described as T+1.
This creates cash flows before expiry: an adverse move can require a trader to pay losses during the life of the contract. At expiry, NSE Clearing marks open futures positions to the final settlement price and settles the resulting profit or loss in cash; the expiry amount is debited or credited on T+1. The position then ceases to exist. See NSE’s equity derivatives settlement mechanism.
Are futures physically settled in India?
For the NSE equity derivatives covered here, NSE describes futures’ final profit-or-loss settlement as cash settlement. That is different from the physical delivery treatment that may apply to particular options. This comparison is about NSE equity derivatives; it should not be generalized to every Indian exchange, product or contract.
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Are options cash settled or physically settled?
There is no safe single answer for every NSE equity option in the official pages reviewed. NSE’s general settlement-mechanism page describes option exercise settlement as cash settled. However, NSE’s individual-securities F&O page describes stock options as physically settled, and its Nifty 50 F&O page also says physical settlement. These statements conflict with the general mechanism page, so they do not establish a definitive rule for every contract.
The settlement-mechanism page is marked updated January 3, 2023, while NSE’s circular listing showed an F&O consolidated circular dated April 28, 2026. The date difference alone does not prove a rule changed. Before holding an option through expiry, check the current NSE Clearing and contract-specification circular for the exact underlying and expiry, and confirm how your broker handles any delivery or exercise obligation. Do not assume an option will always be cash settled.
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What happens if I hold an option on expiry?
NSE says in-the-money option positions are automatically exercised at expiry. Long positions are assigned to short positions in the same series on a random basis. A holder therefore should not assume that doing nothing leaves the position without consequences: the exercise and settlement rules for that contract can result in an obligation that needs to be managed.
NSE describes options as premium-style: the buyer pays a premium for the right but has no obligation, while the seller accepts an obligation in return for the premium. This is why “options have limited risk” is not an accurate description of all options positions. A purchased option and a written option have different exposures, and settlement or delivery can affect the practical outcome.
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Expiry depends on the underlying and contract series. NSE’s contract specifications list Tuesday expiry for the covered equity index and individual-security contracts, with expiry moved to the previous trading day when Tuesday is a trading holiday. Verify the exact date for a specific series because exchange circulars can change specifications.
| Contract family | Cycle described by NSE |
|---|---|
| Covered equity index futures | Three consecutive monthly contracts. |
| Nifty 50 options | Weekly, monthly, quarterly and semi-annual expiries. |
| Several other equity index options | Monthly expiries. |
| Individual-security derivatives | Up to three monthly expiries. |
These are product specifications, not a universal expiry calendar for every derivative. Use NSE’s equity derivatives contract specifications to identify the applicable contract family and confirm the series date.
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What should traders check before choosing a position?
- Cash-flow timing: futures can create daily mark-to-market payments or receipts; an option buyer pays a premium, while the writer takes on an obligation.
- Expiry exposure: in-the-money options can be automatically exercised, and assignment to a short position can occur.
- Settlement and delivery: verify the current rule for the exact underlying and expiry rather than assuming all options settle alike.
- Account-specific requirements: margin, capital, tax and delivery consequences depend on the contract and applicable broker and clearing rules; the cited NSE pages do not establish current values for these items.
The NSE contract-specification page displayed an August 11, 2026 update in the reviewed version. The circular listing showed an F&O consolidated circular dated April 28, 2026. Specifications and operational rules can change, so use the current exchange material for the series you intend to trade.
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