How are almost-zero value 'deep out of money' options settled on expiry?

If one sells options, and the value of that option is near-zero on expiry… what is the best option :-

  1. Square-off at whatever ‘almost-zero’ price?

2)Do not square-off, and let the exchange settle it? Would they be settled at price ‘Zero’?

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Considering its a deep Out of the Money option which has no value there is no concept of settlement here (I could be wrong) - Since there is no value there is no transaction which means you don’t pay any charges for it. So I guess letting it expire worthless is a better option than squaring it off.


If it is near zero it is best to let it expire worthless, this way there is no need to buy back and hence no brokerage or any other charges.

The reason traders usually buy back even if it is nearly zero knowing that it is going to expire worthless is so that the margin blocked for the short positions is released and they can use that to take fresh positions.


Just see how much brokerage and other charges you would incur. (Net credit to your account, sometimes if you have too many lots, it makes sense to square off, net credit will be positive)

If its positive, they you can square off, else let it expire worthless.

Dont forget to include stamp duty.

Has the position changed recently? My option expired worthless but was charged brokerage and other charges. I raised a ticket on call n trade because I never used it. I was informed that the option has been squared off by the system and such squaring off is considered as call n trade.

Indeed, I wish to give me a specific clarification on what happens when I write an option that closes at 5 paisa. ( I think there cannot be anything less than 5 paisa!) For instance, if the lot size is 8000 and there is no intrinsic value on the date of expiry, what will happen to my position? I read that all contracts have to be squared off and if option is bought, it should be squared off necessarily due to STT trap. Kindly post a contract note (hiding the identity of the client) if that is convenient.

Or, let me know what happens to my current position of short ioc 160 nov ce if the spot price is below 160.

Can you share the ticket number here.

If option expired worthless (out of the money), there isn’t any charge on it. If it closes at 0.05, then it is not worthless, it has some value to it and gets exercised. So all charges are applicable at that time.

That issue that used to exist where more STT could be charged than the value of the premium itself, doesn’t exist today. Check this

Had a similar experience today! Positions auto squared off by zerodha today after 3.20 PM. This happens when the positions are “MIS” and not when “NRML”. Learnt from experience today :frowning: