Equity Options physical settlements

I have a bullish view in TATA steel so I deployed put spread in current month expiration I sold ATM option and bought OTM option. 1)Now let’s assume that TATA steel stock goes opposite of my direction and then both the options goes ITM. Before expiry I just can’t exit the trades because of High BID/ASK spread. Will the physical settlement will happen? Or they will cancel out each other since both are ITM? and it will be cash settled.

  1. At what prices will my long option will get executed after expiration? LTP or BID ASK rate?

  2. If the OTM option which I bought goes ATM and the ATM option which I shorted goes ITM will the Physical settlement take place of ITM put option which I sold in expiration?

4)If I don’t exit my credit spreads trades in last 2 days will there by any hike in margin requirement?

If both expire ITM, your position will be netted-off against eachother.

The Options will be settled at Intrinsic Value.

Eg. You Shorted Tata Steel 400 PE and went long in 390 PE, if on expiry day Tata Steel closes on 385, your 400 PE will have Intrinsic Value of 15 and 390 PE will have Intrinsic Value of 5, this will be the settlement price.

ATM is equal to ITM, in this scenario your position will be netted-off against each other.

Yes, your margin requirements will increase for the last two days of the expiry. You can read this post for more details.

nifty trading at 11540 but nifty 11200ce trading at 333 why is this so? @ShubhS9

It is trading close to its Intrinsic Value 11540 - 11200 = 340. Rs. 7 discount to its Intrinsic Value can be attributed to less volumes. This is normal.