Need Clarity on Physical Settlement of Put Option

F&O
1

I need some clarity on Put option buying.

Suppose I bought SBI PE of 910 and paid a premium of 50 thousand roughly @31.5 per lot.

Now I already have 800 shares with me of SBI which I bought earlier at . So, I can physically settle the lot on expiry day.

Now, on expiry day, SBI stock remains at 875 which is ITM.

So, what happens next?

  1. To whom shall I deliver the share @Rs 910 per share? I don’t know who the Put writer is.
  2. I have already paid a premium of 50k. So, whatever profit I will now have is:
    Shares sold at 910 (Strike Price) – (Original SBI share price+ Premium)

Is it correct?

2

Your broker will take care of that, not your concern. Your obligation is limited to ensuring you have the deliverable shares in your demat account.

Yes

1 Like
3

thanks!

4

Don’t wait for the broker to settle. There are heavy charges for settlement done by the broker.

Two options:

  1. You intend to hold the SBI Shares, just square off the put option before market close of expiry day.
  2. You don’t intend to hold the shares, then square off the put option and also sell the shares at the same time before market close of expiry day.