ITM index option settlements

If any penalty is levied on exercise ITM index option which was bought earlier

There is no penalty for letting your Option position expire. However, on exercised options, the exchange charges STT at 0.125% of the intrinsic value.

Can we take position in far forward contract like Dec 2022 or June 2022.

Yes, you can take position in long dated Options. Though there’s not much liquidity in these contracts.

But some brokers don’t allow far contracts to trade