Little Urgent!Should I square off or physcial settlement?

F&O
1

Hey Everyone,

I have 150 Asian paint shares.to hedge it, I bought a lot of May3400 Put options at 405 per share.

I am not clear about settlement vs option square off so I made a table to compare physical settlement vs options square off.

Is it right or I am missing something?

Assumption-

  • Spot price is 3100 coming week
  • Diff option price 200-325

If I go for option square off-

I have to

Bear some Premium Loss
& I will get to keep my stocks-

If I go for Physical Settlement-
I will have to

Pay Extra Charges-.25%+GST
bear the total premium loss

+++
& I will get 3400 per share(strike price)

Total Premium paid-404.7 Physical Settlement Option Square Off Option Square Off Option Square Off Option Square Off Option Square Off Option Square Off
1 2 3 4 5 6
Gain
Price-Spot/Strike Price 3400 3100 3100 3100 3100 3100 3100
Loss
Extra Charges-.25%+GST 10.30 0.61 0.61 0.61 0.61 0.61 0.61
Premium Loss 404.7 79.7 104.7 129.7 154.7 179.7 204.7
2,985.00 3,019.69 2,994.69 2,969.69 2,944.69 2,919.69 2,894.69
Profit/(loss) in option square off 34.69 9.69 (15.31) (40.31) (65.31) (90.31)
Assumption
Option Selling Price 325 300 275 250 225 200
2

Does anybody experience can reply,please???

3

When we move towards the last week. Zerodha will ask Margin of
400*150 = 4,50,000 Rs. as stocks are physically settled. Today, your account should have X% of this amount in cash, each day as we move towards the expiry this amount will be 50%, 70% etc.
Keeping this cash is not better for ROI and also you don’t intend to buy the shares right.
So the next best option is to square off. Whatever premium difference between buy and sell x lotsize is your loss.

There are other ways to convert this as a spread by selling 3000 PE etc but looking at the post you seem to be new to these things.
Exit and move to next month your hedge.

Also note that buying a Put offers protection till 0. It is not ideally what you want. There are better option strategies to hedge your position.

Also your broker may

4

Yes, I am new…also I have 150 shares & I intend to keep it unless there is a huge difference between option settlement vs physical settlement. also, should I wait till Thursday?