Glossary · PSX Mechanics
Cash Settled Futures
A derivative contract on the PSX where the settlement at expiry is made in cash rather than through physical delivery of shares. The difference between the contract price and the final settlement price is exchanged.
01—What is Cash Settled Futures?
The definition — and what it means in practice.
Cash Settled Futures (CSF) are derivative contracts on the Pakistan Stock Exchange (PSX) that track an underlying share (or other permitted underlying) but settle in cash at expiry instead of delivering shares. At expiry, the exchange compares the contract’s agreed price with a final settlement price. The buyer and seller then exchange only the cash difference, which can be positive or negative depending on market movement.
CSF matter because they let investors take a view on price direction or hedge an existing position without buying or selling the underlying shares at settlement. That convenience comes with leverage-like exposure: a relatively small price move can create a large profit or loss versus the margin posted. Practical planning also includes understanding expiry, how gains and losses are settled, and the possibility of needing extra funds if the position moves against you.
If you buy a CSF at Rs 100 and it expires at Rs 110, you receive Rs 10 per share-equivalent in cash; if it expires at Rs 90, you pay Rs 10.
Cash settlement amount = (Final settlement price − Contract price) × Contract quantity
Contract quantity is the number of shares (or share-equivalents) covered by the futures contract.
- CSF are PSX futures that settle in cash; no shares change hands at expiry.
- Your profit or loss is the difference between the contract price and the final settlement price, multiplied by the contract quantity.
- CSF can be used to hedge or to take directional exposure, but losses can be significant if the market moves against you.
- Expiry and the final settlement price mechanics matter as much as the entry price.
- Margin requirements and potential margin calls are central to managing CSF risk.
02—How cash settled futures works on the PSX
The Pakistan-specific rules, conventions, and numbers.
On the PSX, CSF are traded and cleared through the normal market infrastructure: the exchange is regulated by the Securities and Exchange Commission of Pakistan (SECP), and trades clear through NCCPL. Investors typically access CSF through a licensed broker (TREC holder) using their Unique Investor Number (UIN), similar to how they access other market segments.
A PSX investor usually encounters CSF as part of a derivatives or leverage toolkit alongside cash-market trades. Even though shares are held electronically at the Central Depository Company (CDC) for the cash market, CSF expiry does not involve moving shares in or out of a CDC account because settlement is cash-based. What matters operationally is monitoring margin, expiry dates, and how the final settlement price affects the cash difference owed or received.
Because CSF outcomes depend on price moves, common PSX market features like volatility and trading halts can affect how positions behave before expiry. In practice, investors track the underlying share’s price action, liquidity, and spread, and plan for the possibility of needing additional funds if the position becomes loss-making before settlement.
03—Common misconceptions
Where investors most often get this wrong.
A cash-settled future means I will receive the shares at expiry.
No. CSF settle by exchanging the cash difference between the contract price and the final settlement price; the underlying shares are not delivered.
CSF are safer than buying shares because no delivery happens.
No delivery does not mean low risk. CSF can create large gains or losses relative to the margin posted, and adverse moves can trigger margin calls.
If I hold a CSF to expiry, my profit is fixed once I buy it.
Your outcome depends on the final settlement price at expiry. Until then, the position’s value changes with the underlying price movement.
04—Using cash settled futures on BSL
Where this term shows up across the platform — with live data.
- Review how leverage and margin concepts work using our Leverage resources.
- Check the underlying shares you are tracking in the Stocks section.
- Filter liquid names and compare activity using the Stock Screener.
- Follow market movement that can affect derivatives pricing on the Market page.
05—Frequently asked questions
What investors ask about cash settled futures on the PSX.
Frequently Asked Questions
On the PSX, a Cash Settled Futures (CSF) contract is a futures derivative that settles in cash at expiry. Instead of delivering shares, the buyer and seller exchange the cash difference between the contract price and the final settlement price, multiplied by the contract quantity.
Profit or loss is based on the difference between the final settlement price and your contract price, multiplied by the contract quantity. If the final settlement price is higher than your contract price on a long position, the difference is received; if lower, it is paid.
CSF expiry does not involve delivery of shares to a Central Depository Company (CDC) account because settlement is cash-based. Access is typically provided through a licensed broker, and you still need an account setup with a Unique Investor Number (UIN) to trade through the market infrastructure.
CSF can be used to hedge because their value generally moves with the underlying share. For example, an investor holding shares may use a futures position to reduce exposure to short-term price declines. The effectiveness of hedging depends on contract terms, quantity, and how closely the futures price tracks the underlying.
No. Buying shares in the cash market gives you ownership of the shares, held electronically through the depository system, and you may receive dividends if declared. CSF are derivative contracts with cash settlement at expiry, so they provide price exposure without share ownership or physical delivery.
06—Related terms
Keep building the picture.
An agreement to buy or sell an asset at a predetermined price on a specified future date. On the PSX, single-stock cash-settled futures are available on select listed securities.
A financial instrument whose value is derived from an underlying asset such as a stock, index, commodity, or currency. Common derivatives include futures and options.
The amount of capital an investor must deposit with a broker to open or maintain a leveraged position.
The use of borrowed funds to increase the size of an investment position. Leverage amplifies both potential gains and potential losses. On the PSX, leverage is available through margin trading and futures.
A risk management strategy that uses an offsetting position, often in derivatives, to reduce potential losses from adverse price movements in an existing position.
The total number of outstanding futures or options contracts that have not been settled. Rising open interest generally indicates new money entering a trend.
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