A very basic question related to option writing on expiry day…
Nifty was at 11800 when I sold a NIFTY 12000 call option at around 1 rupee in the morning. In the last 30 mins, however, there was a big rally that took NIFTY to 11900 and the 1 rupee option goes up to 5 rupees by the time of closing.
Now, my doubt is:
Is this option expiring ITM or OTM? Since the strike price was 12000 and NIFTY did not reach that level, I believe that it was OTM. So, if I don’t square off the position, I should get to keep the premium. Am I right or am I missing something?
But if I am right, what confuses me is the fact that the 1 rupee option I sold was at 5 rupees…so how could I have been in profit?
Would really appreciate insights from experts.
@Sensibull - Abid, I can use some of your awesome explanations