I am a Zerodha member and I need urgent guidance from you for the following scenarios :
Scenario 1)
Lets suppose that today is monthly expiry of September. I have a short call position in Wipro for example which is deep ITM and it is not liquid and I cannot square it off. I am not holding any stocks of Wipro with me. To avoid assignment risk, what are my different options ? Do i take a counter position so that there is no assignment ? Can i open a fresh long futures position in Wipro in September contract for just the last day and let both positions expire on their own ? What can be other alternatives so that I avoid getting assigned ?
Scenario 2)
Lets suppose that today is monthly expiry of September. I have a short put position in Wipro for example which is deep ITM and it is not liquid and i cannot square it off. I do not have enough cash to take delivery of stock. To avoid assignment risk, what are my different options ? Do i take a counter position so that there is no assignment ? Can i open a fresh short futures position in Wipro in September contract for just the last day and let both positions expire on their own? What can be other alternatives so that I avoid getting assigned ?
Your guidance is urgently required. Pls help.
Thanks and regards
Amit
If your Option position is ITM and you are not able to square-off due to lack of liquidity and don’t want physical settlement, then you can take counter position in Futures and let them expire to net-off your obligation.
Below are the Futures - Options net-off scenarios.
Other than this, don’t think there is any other alternative.
If we do not close positions on our own but take position in futures to offset existing in the money positions, what would be the quantum of charges such as brokerage and stt in such a case ? Will we paying more than normal ? If yes, by how much. Can u pls explain in detail ?
If you have 2 open positions on expiry that result in a net-off(Long futures and short call options) you are not required to give or take delivery for the position. However, there will be STT charged on the long position(s) as this is treated as notional delivery.
For all netted-off positions, at Zerodha the brokerage will be charged at 0.1% of the physically settled value.