Can an Option Contract Be Physically Settled, and If So, How? ▴ Learn

Can an Option Contract Be Physically Settled, and If So, How?

Yes, an option contract can be physically settled. For a call option, the buyer receives the underlying asset from the seller, and the buyer pays the strike price.

For a put option, the buyer delivers the underlying asset to the seller and receives the strike price. This requires the contract to explicitly state "physical settlement" as the delivery method.

What Is the Concept of “Delivery Risk” in a Physically Settled Derivatives Contract?

What Is the Primary Difference between a Physically-Settled and a Cash-Settled Futures Contract?

How Does the Settlement Process Differ between Cash-Settled and Physically-Settled Futures?

How Do Options Contracts Typically Settle Compared to Futures?