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

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

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

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

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

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