New Delhi, Aug. 6 -- Derivative traders and institutional funds could face unexpected stock delivery on monthly stock option expiries under the newly introduced closing auction session, as final settlement prices are determined only after the order-matching window closes, market experts told Mint.

Because a stock option triggers stock delivery only if it expires in the money (ITM), market participants will not know whether they are obligated to take or deliver underlying shares until the auction concludes. Options that finish out of the money (OTM) expire worthless without triggering any delivery obligations.

The upcoming monthly stock option expires on August 25 for the NSE and August 27 for the BSE will serve as the first key test for...