Cipla 1560 Put 2 lots in physical delivery - need to deliver 1300 shares on Monday that I don't have - Market auction

F&O
1

Dear All,

I was holding on 2 lots of 1560 puts of Cipla and it was finally ITM. I need to deliver 1300 shares of Cipla on Monday which I do not have. I have plenty of margin in my account, but it is all collateral against liquid funds (considered same as cash). Given that I don’t have the shares and tomorrow being a settlement holiday I can’t get the shares either, I am looking at a market auction.

Here are my queries:

  1. The broker will buy 1300 shares in an auction and deliver to buyer. How much will he bill me for then? The difference between the auction price and the strike price - 1560? Plus transaction charges. Correct? Please remember that I have to deliver shares and get money.
  2. What if Cipla price goes to 1600 in auction - so I lose 40 rupees? Is that correct. What if Cipla falls to 1500 on Monday and auction is below 1560. Given that I am holding 1560 put, will I get any kind of benefit if Cipla price goes down?
  3. In order to protect myself against adverse upward movements in Cipla price, would it be prudent to buy 2 future lots of Cipla tomorrow evening or Monday? Does that make any sense?

Best Regards,

1 Like
2

usually all brokers buy at high prices in auction i dont know why?
buying future may help only if cipla share increases in price on monday otherwise it will add to your losses, as u have margin u can sell some otm calls if u can take risk , or do a call debit spread where loss is defined,

3

I would suggest don’t do anything. Broker will buy shares in auction and deliver it. You need to pay for the difference in price and charges. Keep sufficient funds as cash. Hence broker can deduct it. Auction price would be always higher than market price. You will not receive any money for delivery because you were holding only derivative contract, not shares.