Why are stock options physically settled?

[ShubhS9]

This should answer your query:

How does the new physical settlement of stock derivatives work?

Here is one of the reasoning behind this SEBI move. Today if you are an operator with access to unlimited amounts of cash/stock, you can keep shorting/buying F&O contracts to move the stock in a particular direction without having to worry about placing a counter trade. So assume a stock with lot size of 5000 is at Rs 100. An operator can keep selling futures/shorting calls to move the price down of this stock. On the expiry day, since everything is cash settled, he doesn’t have to worry about…