I take sell in banknifty ITM option with strike price 42000 call option at 1400 Rs. It is now at 1100 Rs. so i have profit.
on expiry day end if profit remains like this, shud i buy it back or shud i let it get auto exercise…which is more better from brokerage cost point of view?
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Index options are cash-settled, if you do not square-off the position on expiry, ITM positions are settled at the intrinsic value by the exchange. Also, as the position is ITM, the brokerage will be applicable.
The additional STT of 0.125% is applicable only for Long ITM option positions, since you’re holding a short position, the STT is already paid and it’ll not be applicable.
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@ShubhS9 quick question on the same lines…
In the above example i.e 1400 ITM became 1100 ITM on expiry. So, the profit is 300. I want to book the profit. Now assume the liquidity is very poor and only few sellers are available with a bid price of 1200.
So, If I leave the trade for broker to close, will my trade get executed at 1100 or 1200. ??
Thanks in advance.
@Santhosh9 It will be as per BankNifty close price on the expiry day, no matter what the LTP of the option contract was. So, assuming BankNifty closed at 43100 on the expiry day, the IV will be Rs 1100. So you will have to pay back Rs 1100 (+ the contract note charges as usual).
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@IR_B thanks for answering my question. But my question was not related to how much profit/loss. It was about squaring off the positions given 2 scenarios.
I don’t think the broker squares off on expiry, the trade is just settled
Hi @Santhosh9, if you leave your position to expire (taken trade in NRML), then it won’t be squared-off by the broker on expiry day.
If the option expires ITM, it’ll be settled by the exchange at the intrinsic value and any profit/loss will be credited to/debited from your account.
Thanks @ShubhS9 for quick response. One last question, will there be any penalty If I leave it to broker to settle the trade ??
A related Q: If a very very far OTM short Call option is held on till the expiry day and after margin recalculation as per the new rules there is a shortfall of let’s say 10 lakh rupees and I am confident my position will not become ITM but will Zerodha’s risk team still square it off at market price seeing a Margin Shortfall has been triggered?
Pls guide on this…
There is no penalty for leaving your position to expire.
@ShubhS9 Can you pls answer my query too? 1 day to go for this months expiry so knowing this would be really helpful this month and in future months too 
Hi @smakkar, the position will be squared off if there is a shortfall and you don’t add funds after getting the margin call.
If you are referring to stock options, if the shortfall is due to the additional margin blocked (we block 50% of the contract value or 1.5 times NRML margin (whichever is lower) for futures and short options positions). Then the position won’t be squared-off. But if you are not maintaining exchange-mandated SPAN + Exposure margin, then the position will be squared off.
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Yes I’m talking about Stock Options only (Index option rules I am fully aware as have dealt with lots of weekly and monthly expiries over the last few years, but I am new to Stock Options selling, started in Mar’24 only)… I always keep at least 15-20% spare margin or cash available for any required adjustments, but this becomes insufficient on the last day…
So it’s only the expiry day’s margin requirement spike for Stock Options selling that I want to confirm about whether Zerodha will square off my position or not… In order to meet that margin requirement spike I have been exiting my super safe and very far OTM trades few days earlier with many 1000s of profit left on the table just to free up margin 
Look forward to a positive response 
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So if you have a short stock option position, the margin increases to 50% of the contract value or 1.5 times NRML margin (whichever is lower) on the day of expiry. If the shortfall in margin is due to this increased margin, the position will not be squared off, if the position is OTM (if it is ITM it’ll be squared-off).
However, if you are not maintaining exchange-mandated SPAN + Exposure margin, then the position will be squared off.
I have a similar question 
Nifty is at 22500 and the 23100 CE is at rs. 0.3 I sell this option at this value
Nifty expires at say 22800 now if this spike happens in the last hour itself can 23100 CE expire at a value > 0? since it would still be worthless
As the price of Nifty is still below your strike price of 23100 CE, the option is OTM and will expire worthless.
@ShubhS9 sir.
If we maintain exchange mandated span+exposure margin, but unable to meet increased margin requirement on expiry day for short stock otm option, will there be margin penalty?
Will zerodha account have negative balance, and will zerodha charge interest on margin shortfall for the increased margin requirement for expiry day for short stock otm options?
The article says:
³Interest will be charged at 0.05% per day if Zerodha account results in a negative balance when the exchange stipulated delivery margins are applicable from 5 days before the expiry (including long ITM options positions)
I suppose margin increase starting from 5 days before expiry only applies to long itm stock options only.
Short stock options only require increased margin on day of expiry (if they are otm)
Thank you
In order to meet that margin requirement spike I have been exiting my super safe and very far OTM trades few days earlier with many 1000s of profit left on the table just to free up margin …
Hi, have you found any better way to handle this increased margin requirement spike?