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Prior to the implementation of physical settlement in India, how were equity futures and options contracts typically settled?

Physical delivery of underlying securities

Cash settlement based on the contract's value

Conversion into equivalent debt instruments

Automatic rollover to the next contract period

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What was the primary objective behind the Securities and Exchange Board of India (SEBI) mandating physical settlement for stock F&O contracts?

To enhance market liquidity and trading volumes

To streamline the process of contract expiration

To mitigate excessive speculation and market volatility

To promote greater participation from retail investors

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In the context of physical settlement, what is the obligation of a trader holding a long futures contract at expiry if they choose not to close or roll over their position?

To pay the full contract value and receive delivery of shares

To sell an equivalent number of shares in the open market

To forfeit the initial margin deposited for the contract

To extend the contract expiry date with additional margin

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How does physical settlement help in preventing potential price manipulation in the stock market?

By requiring traders to hold sufficient capital to cover potential losses

By limiting the number of contracts a single trader can hold

By imposing stricter regulations on short selling activities

By making it more difficult for short sellers to build excessive positions

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Which of the following option contracts would result in a physical delivery obligation upon expiry under the physical settlement framework?

Out-of-the-money (OTM) call options

Out-of-the-money (OTM) put options

In-the-money (ITM) call options

Both A and B

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What is the process known as when multiple F&O contracts of the same underlying asset and expiration date offset each other, resulting in no physical delivery obligation?

Contract netting

Position squaring off

Margin offsetting

Delivery nullification