Part 9 Trading Master Class

Option Expiry and Settlement

Every option contract has a fixed expiry date, after which it becomes invalid. In India, for example, index options like NIFTY and BANKNIFTY expire weekly or monthly, while stock options usually have monthly expiries.
There are two types of settlements:

Cash Settlement: The difference between the strike and market price is credited or debited in cash (used in index options).

Physical Settlement: The actual delivery of stocks occurs (used in stock options in India).
Understanding expiry cycles is crucial, as price movements near expiry can become highly volatile due to time decay and traders closing positions.