I think the physical settlement is only at expiry and not anytime.
Physical settlement rule applied by SEBI IS ONLY PARTIALLY APPLIED NOT EQUIVALENT TO US where the main goal of physical settlement is you can exercise anytime. Here, it is only at expiry bcoz Govt wants only the extra STT, but don't want to give the advantage like US.
That is my main objection, they are mixing the different and different rules only to attract more STT and more cash volumes.
Mixing Europian Black Black Scholes models with US type of Physical Settlement (where the main goal of that Physical Settlement is you can exercise anytime but here it is applied only at expiry).
You can see how the rules are twisted and applied partially to favor the Gormint only.
There is the basic flaw in the idea, of copying US type physical settlement. For physical settlement stock options must be liquid.
US market is well developed and contracts are very liquid, no comparison with India. In India, those 46 stocks F&O are not liquid, not deserve physical settlement at all.
Here only a few stocks options are liquid enough out of about 200s of Future contracts. Traders will ultimately move to few liquid stock futures and index futures. The volume will shift to only selective Stock F&Os and Index Futures. This is very bad for the overall market structure.
SEBI has no idea of the consequences of such mischievous experiment. Let's wait and watch the effect until they implement it to all stocks derivative by phased manner (as they said).
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