Intrinsic Value Of Option on Expiry Day

Let’s say the price of the underlying is at 190 and I have a call option of 185 , so can I get the 5 rupees profit without having to buy the underlying stock at 185?

Yes, in India it is only cash settlement.

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All F&O trades are cash settled in the Indian Exchanges.

By definition, the Buyer of an Option has the right to exercise his option by buying the underlying at the specified strike price but is not obligated to do so. In reality, there is no actual buying of the underlying entity when options are exercised. Only cash transactions take place where profits and losses are decided by the change in option premium price only. For ITM options that are exercised, the intrinsic value is the profit and this is settled in cash.

In you case, if at expiry the underlying is at 190 and you have a call option of 185, your Intrinsic value will be 5. This will be your profit.

You also need to consider higher STT for Open Buy option positions that are exercised at expiry.

STT on normal option trades done on the exchange is charged at 0.05% of the selling side of the premium value. STT on Buy option positions that get exercised is 0.125% of the entire contract value.

You can read more about STT Trap here.

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Thanks guy for the information ! :slight_smile:

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