i have gone through various thread on this forum but i still have few queries related to index option settlement and margin.appreciate ur response on the same.
consider my account funds is 20000 rupees and on expiry day i enter the following positions.
1)39900 ce at 100 with 4 lots (100254=10000)
2)39900 pe at 20 with 4 lots(20254=2000)
and bank nifty closes at 40500 , by this what i understand is ce will be ITM and pe will be OTM
my calculation
a)pe will be otm and rupees 2k will be loss.
b) ce goes from 100 to 400 and it will be like 300 points gain … 7500 rupess - the stt of 0.125% on instrinsic value.(39900-40500=600254*.125%= 75)
so final settlement will be (ce 10000+7500-75stt-2000pe premium = 15425)
if i didnt square off my poistion in NRML order type . how this settlement will happen??
and i see somtimes the price of ce goes to 400 from 100. and i cant exit the position with limit or sl or market price (i see somtimes there are errors like “blocked range of price”)
what exactly that msg is… can anyone explain??
and if i dont square off position and its MIS type. will the RMS square off?? n what if the positions doesnt goes sold. (no buyer)… how it is settled?
If Bank Nifty closes at 40500 on expiry day. Your 39900 Put Option will be OTM and will expire worthless and will lose entire premium paid.
If you are not squaring-off your position, the ITM Option will be settled at intrinsic value.
With Bank Nifty closing at 40500, the 39900 Call Option will expire ITM with intrinsic value of 600 (Spot Price - Strike Price).
Your net P&L will be Rs. 500 * Lot Size (600 - 100 premium paid). Also, as you are holding Long ITM Option, STT will be applicable at 0.125% on the intrinsic value.
Due to member level OI limits, you can only buy options in certain range. This restriction is only for taking Long positions, you can sell options at any strike price. You can learn more on this here.
Yes.
This will be converted to NRML and will be settled by the exchange.
sir i have noticed that on expiry day. generally all strikes are allowed? correct me if im wrong. i’ve been using zerodha from long time. i understand the nudge appears if we try to buy out of range position . it keeps on changing during day. but i noticed on span page all strikes are allowed on expiry day.
now my question is can i enter a position hedge at 1:30 pm using NRML type order and exit the position at whatever the strike price say the premium of ce at 1:30 is 100 and pe is 50. and if i want to exit the positions at 3pm . am i allowed to do that? if ce premium price went to 450 from 100. am i allowed to exit the position?
i see some notifications popup msg that u cant sell at 450 price.?? is that so? i dont remember the exact msg but there is some restriction of price apart from nudge(OI limits).
can u please do the calculation or check the below calculated
net profit = 500100(4lots)=50000?? or only the price of ce 100(bought price)-450(closing price)=350100=35000-stt of .0125% on intrinsicvalue and brokerage charges.
wil there be any additional penalty if the option expires ATM? provide me the link where i can see atm ITM or OTM of the said. is it considered the same as on nse website??
Yes, you can exit the position any time you want to when the markets are open.
There is no such restriction.
If you are letting the option expire, the the difference between your buy price and settlement price will be your P&L.
If you are squaring-off your position, the difference between your buy price and sell price will be your P&L.
Both minus brokerage and other charges. The STT of 0.125% is applicable only if you let your Long Option position expire ITM. If you square-off the position before market close on expiry day, normal charges will be applicable. You can easily calculate the charges here.
No.
It’s easy to determine the moneyness of the Option. For Call Options if underlying price is > strike price, the Option will be ITM and for Put Option if underlying price is < Strike Price, the Option will be ITM.
Would suggest you read this module on Varsity for more information on Options:
Sir one last query. Could u plz do the calculation for me…in both instances… it takes time for me understand. I’m from IT field.and this trading is new to me. Just 2 yrs exp… never held option until expiry.
My example: thursday 1:30 pm i bought ce and pe using nrml type.
39900ce 100 price of premium*100qty and it closed at 40500. Ce premium 450
39900 pe premium price 50*100qty Closed at .05
Plz do the calculation for the above
i will calculate stt(39900-40500=600-100(500100qty.0125)for itm ce 63 rupees. And ce 100-450=350 points. (35000rupees) or just 500 rupees??
For pe i will loose the entire premium 5000 rupees.
Bro… if market closes at 40500 you and haven’t square-off your position, your call option will expire at intrinsic value of 600 not at premium of 450.
So difference between your buy price 100 and settlement price 600 will be your PnL…
and your 39000 put will expire worthless as it is OTM… you lose all the premium paid…
STT is on 600 not 500. 500 is your net PnL… Options value is 600, STT is deducted on this…
you mean in negative? No, option premium goes only to 0 not negative… why don’t you read options module on Varsity @ShubhS9 shared above… that covers everything…
bro… final calculation will be
1)a)for ce … i bought at 100 premimum (100100=10000 rupees)+brokerage and stt normal.
and after i let it expire that means (500100=50000 rupees profit)-0.125% of stt on intrinsic value of 600 - minus brokerage charges.
and no penalties.
b) for ce if i sold it before 3:25 pm at premium of 450… that means 350points profit multiplied by 100=35000 - stt normal - brokerage -gst charges.
2)for pe the premium will be zero(50*100 quantity)=5000 rupees loss + brokerage charges and stt normal charges and gst.)
correct me if im wrong… i have already gone through the varsity module. but wanted to look for solution with a real time example.
@ShubhS9
i read this calculation, two more questions to add this query.
As index are cash settled. there are not additional margin required in case if its a buy position. suppose i have 50k in my account balance. and i buy one lot of ce and pe say at 40000 spot price.
a)40000 ce bought at 148 premium =148 multiplied by 25= 3700 rupees
b)40000 pe bought at 80 premium=80 multiplied by 25=2000 rupees
bank nifty closed at 40520
pe goes otm and i loose entire 2000 + brokerage charges
now my question is if i exit 40000ce at 3pm with premium of 500 i will be in profit of (500-148=352 multiplied by 25 one lot in my case= 8800 rupees-brokerage and normal stt
if i hold 40000ce and bank nifty closed at 40520 that means my profit for ce is
520-148=372 multiplied by 25=9300 minus( stt of 0.125percent on intrinsic value 520multiplied by 25 on lot )=16.25 rupees=9300-16.25=9283.75 rupees - brokerage.??
do i need to have any additional margin like stock option(lotsize multiplied by spot price)??
question 2. if the intrinic value is less than the value of premium which i purchased? do i get any additional penalty… suppose i purchased 40000ce call buy at 260 premium and market closed at 40200. then my ce will be itm , but the intrinsic value is less than the premium purchased??
what will be penalty in this scenario. i came across one more thread here where in user’s currency option expired itm but intrinsic value was less than purchase price.