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Define: Options Settlement

Options Settlement is a process where the obligations of the holder and writer of an options contract are resolved according to the terms of the contract.

Options settlement can take two forms; Physical settlement and Cash Settlement. Physical settlement is when the actual underlying asset is being transferred to the party paying for it at the strike price stated in the options contract. Cash settlement is when only the net profit or loss is settled between the two parties in cash and no assets are transferred.

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