Exercising option means :- Not squaring off or holding the position till the expiry day, then the exchange will use that day’s settlement price and close your position.
In US market, you will have to give / take delivery of stocks depending on PUT / CALL option.
ln Indian market, where options are settled in cash, depending on the strike price of option and that day’s settlement price, net profit or loss will be credited/debited to you account.
Square-off options means:- Here you go to open market during trading hour and place sell order for the option that you hold.
Financial implications depends on the execution of both the buy & sell prices.
Adding on to Praveen’s answer - It is not advisable to exercise (hold till expiry) any buy positions in options as that might result in huge amounts of Security Transaction Tax in current Indian markets.
Hello sir,
I have a small doubt
In Indian markets European style options are available, so we have to excersied only on expire right. Then how can people buying and selling the options.
For exercising only u have to wait…but if u want to exit a open buy call option ( for eg) u have to use square off option in ur broker site. This will create a exactly opposite position thereby netting off and exiting you from the trade with profit or loss
