In Current expiry, I had Eicher Fut Long and 4200 CE short like below and similar setup for Axis bank
I had 108 shares of Eicher in my holdings with average of 3701 or something.
In report, i am seeing Intrday activity on Expiry day like below (I am assuming this is Zerodha closing the trade)
Can someone clarify why above happened?
Ideally this position should have netted off right? Or am I missing something.
Note: I did not close the trade at 3:30 PM
It is indeed netted off… but at stock level. One leg needs you to buy EICHER stock at 4615, and the other leg needs you to sell EICHER stock at 4200 (the strike price). This will count as a intra-day trade for you.
Thank you, that explains.
I was under the impression that netting off would mean similar to cash settled trade and nothing from my “Holdings” would be touched.
Lesson learned to close it before expiry.
Can you help with one more thing, in above example, 4200CE was way ITM and therefore not liquid.
If I want to do above setup of Fut long and CE short , and it goes ITM, what adjustments can i do to ensure i can close both legs at expiry with decent liquidity.
One way i can think of is to book ITM CE and short equivalent premium lots of further OTM CEs. So for example, book loss in 1 lot 4200CE and sell maybe 2-3 lots of 4500 CE.
What do you think.
Hi @Kirk_Moors
Your Deep ITM call works just like a future, so in the end you were “long future and short future” at the same time and not really gaining from any price movement. But you still had the outlier risk if Eicher stock broke 4200 levels due to any adverse news.
So, I think in such scenarios, one should try and exit both the positions a day before expiry or at least not wait till 3 PM on expiry day. Liquidity is low, but if you are willing to wait, you may get close to fair prices.
