how are illiquid options settled for a seller ?

Example : if i sell a option of a certain company and it becomes illiquid will a delivery be given at expiry or will i get my profit/loss ?

Index options (Nifty, Bank Nifty and FinNifty) are cash settled. Your ITM option position will be settled at intrinsic value upon expiry.

If it’s a stock option and if your position expires ITM, you’ll have to give or take delivery of underlying shares depending on the type of option you hold (Call or Put).

You can learn on option moneyness here and physical settlement here.


@ShubhS9 ,
Good Day
One silly question to get more clarification.

Suppose I have written 500ce of abc stock. And it closed at 499 on expiry. In means I have otm option. I am assuming I get entire premium not the stocks right?

Yes, the option will expire OTM, there will be no physical settlement and as an option seller, you’ll get to keep the premium received.

Thanks much. Have a nice day ahead

Thankyou @ShubhS9 for clearing the doubts

Hello ShubhS9,

I am new to options.

I hedged Asianapaints via May3400PE buy when the spot price should be 300 (I am not sure).
Now it’s showing My premium loss is approx (404.7-320)=80-85 per share.
however, my share only rose approx 70-75 per share now.
So why did it happen? I thought I was hedged completely.
Also, should I give delivery on 26 expiry May or sell Put? it seems if I give shares delivery it would be more beneficial?
Please suggest.
Thank you,