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Physical settlement of F&O

Physical settlement means stock derivative positions at expiry are settled by delivery of shares rather than only cash.

Many single-stock F&O contracts on NSE are subject to compulsory physical settlement.

Short futures or assigned short calls can create delivery obligations for the underlying shares.

Long futures or exercised calls can require paying cash to take delivery.

Brokers often warn clients before expiry if demat holdings or funds look insufficient.

Part of the Market Pulse Term of the Day series — factual market vocabulary, not investment advice.