Call Option Sqare Off

Hi, I am holding a Call option of HINDUNILVR14JUN590CE​ brought @ 6.40

Now as on 18th June I see the bid price of same strike price = 26.70 and ask price 36.00.

  1. My question is if I want to sqareoff my call option whose LTP is 41.90 will I be able to sqareoff near 41.90.

  2. If the answer to question 1 is NO and you are saying if the last bid price is 26.70 who will give me 41.90 then just wanted to know why there is a big difference between LTP and BID Price.

  3. What if I wont sqareoff this position .And lets say on 26th Jun the underlying stock price is 620, then how much will I be getting considering I need to pay big STT amount. can u pls give an example and elaborate the emount including STT amount

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The reason you are seeing such a big spread is because of lack of liquidity or only a few people participating in trading that contract.

You can place a limit order for selling at 41.9, but there won’t be any guarantee that it will be executed. So yes, if you want to exit it right now, you will have to sell it at 26.7. If you are not in a hurry to sell, you can always put any limit order above 26.7 and hope that it is hit.

If you do nothing and HUL expires at 620, your 590 calls will get exercised and you will get back Rs 30 (620-590). But as you got it correctly, STT on exercised options is 0.125 of the contract which in your case is 620 x 500 x 0.125% = Rs 387/lot. which would be only around Rs 2.5/lot if you sold it on the exchange (0.017% of Rs 30 x 500).

Hopefully clarifies

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Thanks Nithin for clarification.
So I was thinking isnt it better to pay 387 as STT instead of selling it at 26.7 now . Because if I sell it 26.7 I will loose (41.9 - 26.7 = 15.2) i.e 15.2*500 = Rs.7600

Yep makes sense if you think stock will stay where it is or go higher, no need to be penny wise pound foolish… :slight_smile: