I’m new to fno trading. What exactly does cash settlement of ITM options mean. If let’s say I buy nifty 20000 CE at X rs and nifty expires at 20500, what’s the calculation of debit that’s going to happen from my trading account on expiry
If you purchase a Nifty 20000 Call Option at a price denoted as X, and the Nifty index expires at 20500, your account will experience a net credit if X is less than 500. Conversely, if X exceeds 500, there will be a net debit. In the scenario where X is less than 500, your account will receive a credit calculated as (500 - X) multiplied by 50 for one Lot. On the other hand, if X is greater than 500, a debit of (X - 500) multiplied by 50 for one Lot will be incurred.
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Let’s assume that X was 400. You paid 400 upfront when you entered the trade.
You had hoped that you could sell at 600. Unfortunately, it found resistance and decay.
The expiry week ended at 20500.
Now the settlements will pay you 20500–20000 = 500.
Since you have paid 400 already, your net gain is only 100 points.
Assuming you bought just 1 lot, it is 100*50=5000
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