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For Indian NSE equity derivatives, expiry is contract-specific, settlement depends on whether the underlying is an index or an individual security, and the margin you need is portfolio- and date-dependent. NSE specifications generally place expiry on Tuesday of the relevant expiry period; when Tuesday is a trading holiday, the previous trading day is used. Futures, index options and individual-security derivatives do not all produce the same settlement obligation.
This guide is limited to NSE equity futures and options. Currency, commodity and derivatives listed on other exchanges can use different calendars, settlement methods and margin rules. Always check the active contract specification, exchange circulars, your broker’s expiry notice and your available funds or securities before carrying a position into expiry.
What does “expiry” mean in F&O trading?
Expiry is the final trading and settlement date written into a futures or options contract. After that date, the contract no longer trades in its existing form. A position that is closed before expiry is settled through the normal trading process; a position still open at the cut-off can be settled automatically under the rules for that product.
NSE’s equity-derivatives specifications list Tuesday of the applicable expiry period for the covered index and individual-security contracts. If Tuesday is a trading holiday, the preceding trading day becomes the expiry day. This is a product rule, not a universal rule for every derivative in India: different products can have different weekly, monthly or longer cycles.
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Why the exact contract calendar matters
- Two contracts with the same underlying can have different expiry months or weekly cycles.
- A holiday can move the effective expiry date to Monday or another preceding trading day.
- Trading hours, final settlement timing and the last time to close a position are set by the exchange and can change through circulars.
- Do not rely on a generic “Tuesday expiry” statement without checking the active contract symbol and calendar.
Use the expiry date shown for the individual contract in the NSE contract calendar and in your broker’s position screen. Treat the exchange calendar as controlling if a broker display and an older article differ.
What happens when a futures or options contract reaches expiry?
The result depends on both the instrument and the underlying. The following summary reflects the NSE framework described in its settlement and physical-settlement material, with an important qualification for individual-security contracts: operational rules and circulars can change, so the active contract specification takes precedence.
| Contract | What happens at expiry | What you must be prepared for |
|---|---|---|
| Index futures | Expiry profit or loss is settled in cash, and the position ceases to exist after expiry. | Maintain funds for the final mark-to-market or settlement debit. |
| Index options | In-the-money options at the close are automatically exercised under the cited NSE framework; index-option exercise settlement is cash-settled. | Do not assume an in-the-money option will simply disappear because you paid a small premium. |
| Individual-security futures | Settlement treatment is governed by the current stock-derivatives specification. NSE’s physical-settlement FAQ addresses delivery obligations and delivery margin for equity derivatives. | Be able to provide or receive the required securities or funds if the active contract requires delivery. |
| Individual-security options | In-the-money options are subject to automatic exercise under the cited framework. The settlement outcome must be checked against the current contract specification and physical-settlement instructions; older NSE settlement wording should not be treated as a current universal rule. | Prepare for a possible delivery or receipt obligation, plus applicable margin, rather than assuming cash-only settlement. |
NSE’s settlement mechanism page, updated on 3 January 2023, describes automatic exercise and cash-settled exercise language for index options and options on individual securities. NSE also publishes a separate physical-settlement FAQ covering delivery margin and delivery obligations for equity derivatives. Because those materials have different dates and scopes, the safe approach is to verify the live contract specification and the latest exchange circular for an individual-security contract.
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An option that is out of the money at the relevant expiry valuation normally has no exercise value and expires without an exercise settlement. The option premium paid by a buyer is not a substitute for checking the contract’s exercise rule. If the option is in the money, automatic exercise can occur without a separate instruction from the holder.
What is physical settlement?
Physical settlement means the settlement obligation is completed with the underlying shares and the corresponding payment, rather than only with a cash difference. A party required to deliver securities must have eligible securities available; a party required to receive them must have sufficient funds and an account arrangement capable of receiving the securities.
Physical settlement is not synonymous with “all F&O.” Index contracts have an index as their underlying and cannot deliver an index basket through a single stock-delivery instruction. Stock derivatives can involve delivery obligations under the applicable NSE framework. The contract specification determines whether the obligation is delivery, receipt, or a cash amount for that particular product and expiry.
Delivery margin near expiry
NSE’s physical-settlement FAQ says delivery margin applies from expiry until settlement or an eligible early pay-in. The amount is included in the client’s total upfront margin in the daily margin statement. This is an additional requirement beyond the ordinary risk margin that may have been visible earlier in the life of the contract.
The same FAQ says securities receivable through physical settlement cannot be used for a margin-trading facility. In practical terms, do not assume that shares you expect to receive at settlement can immediately support another leveraged position.
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Typical physical-settlement sequence
- Identify the obligation. Confirm the contract, expiry, lot size, buy or sell direction and whether you would deliver or receive shares.
- Check the final position. Close or reduce the position before the broker’s stated cut-off if you do not want the expiry outcome.
- Review the margin statement. Look for SPAN, ELM, delivery margin and any crystallized-obligation amount rather than only the headline available balance.
- Provide securities or funds. A deliverer should arrange eligible shares; a receiver should arrange the required cash and settlement account capacity.
- Use early pay-in only as instructed. If your broker and clearing process support early pay-in, follow their exact deadline and security-eligibility instructions.
- Confirm completion. Check the post-settlement ledger and demat statement. Do not assume that a broker’s position quantity changing to zero means every cash or securities entry is complete.
How are F&O margins calculated?
There is no stable, exchange-wide answer to “How much margin does one F&O trade need?” NSE uses SPAN, a portfolio-based scenario system, and adds other components that change with the contract, portfolio, volatility, expiry proximity and settlement status.
NSE describes SPAN in these terms: “The objective of SPAN is to identify overall risk in a portfolio of futures and options contracts for each member.” The system scans defined price and volatility scenarios, calculates the portfolio loss in each scenario and uses the largest loss as the scanning-risk charge. Daily risk-parameter files and the actual positions determine the result.
Main margin components
| Component | Purpose | What changes it |
|---|---|---|
| SPAN or scanning-risk margin | Covers the largest modeled loss across the exchange’s defined price and volatility scenarios. | Underlying price, volatility, time to expiry, contract size, offsets and the rest of the portfolio. |
| Extreme Loss Margin (ELM) | An additional charge applied to notional exposure under the exchange’s equity-derivatives parameters. | Product type and the current NSE margin file. The cited equity margin page lists 2% of notional for index derivatives and 3.5% for stock derivatives, subject to change. |
| Delivery margin | Covers the risk of a delivery obligation around expiry for applicable equity derivatives. | Whether the position is in the delivery period, the contract, the obligation and the timing of settlement or early pay-in. |
| Margin on crystallized obligation | Applies to an obligation that has been determined for settlement and is being collected under the member-level process. | Final settlement amount and the current collection timetable. |
| Mark-to-market or settlement debits | Reflects losses that become payable as the futures position is revalued or reaches final settlement. | Price movement, settlement price and whether the amount has already been collected. |
NSE’s equity-margin material describes initial margin as based on a 99% value-at-risk calculation over a one-day horizon. It also describes a two-day horizon in the particular futures circumstance where mark-to-market settlement may not be collected before next-day trading. These are exchange methodology descriptions, not a promise of a fixed customer margin.
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NSE says SPAN and ELM are collected upfront from F&O clients. Its member FAQ says delivery margin and margin on a consolidated crystallized obligation are collected by T+1 under the cited process, which references a 2025 amendment to collection timing. Confirm the current timeline with your broker because the client-facing debit, release and notification process can vary.
Illustrative ELM arithmetic, not a margin quote
Suppose an index position has a notional value of ₹10,00,000. Applying the cited 2% index ELM parameter would produce ₹20,000 of ELM before SPAN, brokerage or any other charge. On the same notional value, the cited 3.5% stock ELM parameter would produce ₹35,000. These calculations are illustrations only: they do not represent the total funds required, and the exchange can change the parameters.
How to check the amount you need before expiry
- Write down the exact contract. Record the underlying, futures or options type, strike, expiry date, lot size and number of lots.
- Classify the underlying. Mark it as an index or an individual security. This determines which settlement and delivery questions must be answered.
- Read the active specification. Confirm the expiry weekday, settlement method, automatic-exercise rule and any delivery provisions in the current NSE document.
- Check the latest risk file or broker margin calculator. Use the value for the actual portfolio, not a search result for a different expiry or a single-leg estimate.
- Separate every margin line. Note SPAN, ELM, delivery margin, crystallized-obligation margin and any mark-to-market debit separately.
- Stress the funding requirement. Ask what happens if the underlying moves sharply on the last trading day, if delivery margin is added, or if a settlement debit is collected before you can transfer funds.
- Confirm securities availability. For a possible physical delivery, verify share quantity, eligibility, demat balance and the broker’s early-pay-in cut-off.
- Set a personal exit deadline. If you do not intend to settle, close the position early enough to allow for market liquidity, order rejection or a broker cut-off.
What are the main risks of holding F&O to expiry?
Leverage and gap risk
A derivative controls a notional exposure that can be much larger than the cash posted as margin. A sharp overnight or intraday move can consume available funds quickly. SPAN is a risk model, not a maximum-loss guarantee; an actual move can exceed the scenarios used for a particular margin file.
Delivery and funding risk
A stock derivative that enters a delivery period can require securities or cash at short notice. An option buyer may have paid only a premium initially, yet an in-the-money exercise can still create a settlement obligation under the applicable contract rules. A seller can face both margin calls and a delivery requirement.
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Margin-change risk
Margins are recalculated as prices, volatility, portfolio offsets and expiry status change. ELM parameters, SPAN risk files and delivery-margin requirements are not permanent constants. A position that appeared adequately funded earlier can require more cash near expiry.
Liquidity and execution risk
Closing a position is not guaranteed at the price shown on a screen. Bid-ask spreads can widen, depth can disappear and a market order can fill across several prices. Waiting until the final minutes increases the chance that a broker cut-off or a trading halt leaves the position open.
Operational risk
Incorrect contract selection, an overlooked holiday, an unprocessed fund transfer, an ineligible security or a misunderstood broker notice can create a settlement shortfall. Reconcile the contract symbol and expiry date in the exchange and broker records rather than relying on memory.
Can a broker square off an F&O position?
A broker may have a risk-management or expiry square-off policy, but the exact trigger, time, product coverage, order type and charges are broker-specific. The cited NSE material does not establish one universal broker policy. Some brokers may reduce or close positions before expiry when delivery or margin risk becomes material; others may require the client to act earlier under their customer agreement.
Do not treat a broker’s ability to square off as a guaranteed free exit. An attempted square-off can be affected by liquidity, exchange restrictions, order rejection or a fast market. Read the broker’s current expiry notice and terms, and contact support before the broker’s stated cut-off if you do not understand the treatment of your position.
Index versus individual-security derivatives: the decision points
| Question | Index contract | Individual-security contract |
|---|---|---|
| Underlying | A market index. | A listed company share. |
| Expiry calendar | Use the exact index contract cycle; weekly and monthly patterns can differ. | Use the exact stock contract calendar and holiday adjustment. |
| Settlement | Index futures expiry P/L and index-option exercise are described as cash-settled in the cited NSE framework. | Check the current stock-derivatives specification; physical delivery obligations and delivery margin can apply. |
| Margin | SPAN and ELM, with the cited 2% index ELM parameter subject to change. | SPAN and ELM, with the cited 3.5% stock ELM parameter subject to change, plus possible delivery margin. |
| What you must fund | Cash settlement and changing margin debits. | Cash settlement where specified, and potentially both securities and cash for delivery. |
This is a classification framework, not a statement that one structure is safer. The relevant risk depends on the contract, portfolio, market conditions and your ability to meet a settlement obligation.
Expiry-day checklist
- Confirm the exchange expiry date and whether a holiday moved it earlier.
- Identify whether the underlying is an index or an individual security.
- Check whether the contract can be automatically exercised when in the money.
- Read the latest settlement and physical-delivery instructions.
- Review SPAN, ELM, delivery margin and crystallized-obligation lines in the margin statement.
- Keep sufficient cleared funds, not merely a promised transfer.
- If delivery is possible, verify eligible securities, demat availability and early-pay-in deadlines.
- Close the position before the broker’s cut-off if you do not want expiry settlement.
- After expiry, reconcile the ledger, margin release, cash settlement and demat entries.
What the available NSE material does not establish
Exchange methodology does not tell you the margin for a particular customer without the contract, date, portfolio and current risk file. It also does not establish your broker’s square-off policy, customer charges or current tax treatment. An older archived physical-settlement FAQ contains historical securities-transaction-tax references; those figures should not be used as current tax advice. For tax, brokerage and broker procedures, use current official or contractual documents applicable to your account.
F&O expiry is therefore a planning event, not merely a date on a calendar. The correct question is not “How much margin does F&O need?” but “For this contract, on this expiry, what settlement can occur, which margin components apply, and can I fund or deliver it on time?”
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