Can someone pls explain the differences between trading nifty options and mcx goldm options? What to do if an OTM option becomes ITM and there is no liquidity at the fair value?
Hey @ron94
Nifty options are settled in cash.
Same for MCX GoldM options in Zerodha there is no physical gold involved.
But if an OTM option becomes ITM near expiry, here’s what happens:
- If the option is In The Money (ITM) on expiry, it turns into a futures contract this is called devolvement.
- If you don’t have enough margin in your Zerodha account, they will automatically close your position after 7 PM on expiry day.
- If you have enough margin, then from the next day, you’ll be holding the GoldM futures contract of next month instead of the option.
You can check on this support article for a detailed understanding.
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Thanks for the reply. If a goldm option is OTM and it looks like it will remain OTM till expiry, can i continue to just hold it and it will expire worthless, or do i have to square it off before the start of delivery period?
OTM contracts expire worthless.
If you don’t square them off before expiry, they’ll expire worthless.
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Any idea why Gold and GoldM futures are trading at different price, even when they are expiring at the same date (both expiring August 5th)? Do they have different calculation of closing price?
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Hey @dcd
These are derivative contracts, so their prices can vary during trading hours based on factors like demand-supply, liquidity, and bid-ask spreads. However, upon expiry, both Gold and GoldM futures settle at the same final price, as determined by the exchange.
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If dere is no need to square off far otm options in expiry den why u have written in articles square off ur position before 7 pm