For traders dealing in stock derivatives, physical settlement involves a process where traders either deliver or receive shares upon contract expiry. To take or give delivery of the entire contract value worth of stocks, one must either have full cash or stocks available post-expiry. This increases the overall risk exposure.

To manage this risk, the following Share.Market Physical Settlement Policy will be followed:

• Expiry Day Blocking: All current-month stock F&O positions will be blocked on the expiry day (Tuesday) except for Futures Intraday positions.
  
• Physical Delivery Margin from E-4: Physical delivery margin will be blocked starting from E-4 (Wednesday) for all current-month In-The-Money (ITM) and Close-To-Money (CTM) stock options contracts.
  
• Margin Blocking One Day Before Expiry: 35% of the contract value will be blocked for all long stock options (including up to 3% Out-of-The-Money (OTM)) one day before expiry (Monday).
  
• Margin Blocking on Expiry Day: 100% of the contract value will be blocked on the expiry day (Tuesday) for all current-month stock futures and stock options (including up to 5% OTM) open contracts.
  
• Trading Until Expiry-1 Day: Traders can continue to trade in stock F&O as per the delivery margin applicable from the exchange till Expiry-1 day (Monday / one day before expiry).
  
• Auto Square-Off of Positions: All current-month open positions that result in a margin shortfall due to physical delivery margin requirements will be squared off automatically.