With STT on expiry not an issue anymore, what happens if you cannot find buyers for deep in the money option ? Will the exchange setlle it if you hold it to expiry ?
Yes, the exchange will return the intrinsic value premium of your ITM option on expiry but since the settlement happens at the exchange, the higher STT will apply. One has to square off their buy option positions before expiry to avoid higher STT. But if there are no sellers, you are forced to allow it to expire.
4 Likes
Okay thanks a lot
1 Like
You[quote=“Srinivas, post:2, topic:24855”]
But if there are no sellers, you are forced to allow it to expire.
[/quote]
Mr Srinivas, correct me if I m wrong. I feel it should be-
But if there are no “buyers”, you are forced to allow it to “exercise” .
ITM options dont expire worthless.
okay but how big of a difference does that translate to? i mean the difference between squaring off before expiry versus letting it expire and let the exchange deal with it
Hi
This is regarding sold index option.
i would like to know what happens to the sold option that goes deep in the money and we are not able to square off the position? How does the exchange settle the option and is there extra charges if the exchange settles it rather than we square off before expiry?
No extra charges, settlement happens at settlement price which will be equal to intrinsic value.