April 24, 2018

What will be the impact of physical delivery of stock derivatives?

The problem with physical delivery is that it is close to impossible to short-sell a stock in the Indian market. We have seen this in the cash segment. While a short-selling mechanism exists in theory, shorting stocks outside the F&O segment, except in day trades is impractical.

The short-seller must borrow stocks from some institution that holds it in the portfolio. This involves first, the willingness of such an institution to lend stock. It also involves paying interest, and having to buyback from the market to replace the stock and complete the trade.

Read more at http://www.business-standard.com/article/markets/what-will-be-the-impact-of-physical-delivery-of-stock-derivatives-118042300171_1.html

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