If I buy the IRCTC option CE 3920 (just an eg) and there is something called delivery in stock option which is different from index options, they’re saying that when it got hit price, we need to take delivery. Someone, please guide me in this.
If you have bought the stocks option and hold it till expiry, then if the option turns into in the money then you have to take delivery of the number shares equal to the options quantity bought. If the option turns into OTM then dont worry.
If you close the position (sell the bought option ) before expiry. Then no need to worry.
However if you decide to take delivery of options then you have to maintain sufficient margins in your account
You can go through this support article to know about Zerodha’s policy on physical delivery - What is Zerodha's policy on the physical settlement of equity derivatives on expiry?
If the IRCTC price on expiry (30 Sep ) closes above strike price 3920, you will have to take delivery by paying 3920 X 325 = 12,74,000. You should have 12.7 L in your trading account.
If you do not wish to take delivery, square off your option position on last friday before expiry (24 Sep) to be on safer side.
The theta decay usually accelerates closer to the expiry , Which means your Option price keeps decreasing, thus limiting your profit.
Hope this answers
So, if it reaches, before the expiry date. What do I need to do? Thanks! Everyone for your reply.
Ideally square-off ( sell ) and pocket the profit.
If before expiry I making more loss what will happen. Can I wait Till expiry. Till i get a minimum profit/loss. Sorry to bother
This is how ‘Greed’ takes over you. That’s not a good idea. Have a proper entry and exit plan. It’s a must especially while trading in derivatives
If you are waiting for expiry expecting(hope) that your posittion turns green, this is not a good idea.
Remeber ‘most options expire worthless’, theta effect (if you are in buy side) will slowly eat your position if you wait. Hoping for profit or less loss.
Have a proper plan. Hedge your positions and have a strict stop loss.
Before that, read Varsity and NSE options book.
Sure, TM, I’m reading all these (Varsity, some courses) and learning it also. Small nerd doubts that’s because new to FnO. No greed at all.
Ok. That’s cool.
I’m not telling that you are greedy, I’m just telling that greed kills (it’s for all of us, a common emotion).
Good to know that you are learning. Feel free to post your doubts in this forum and definitely there will be someone to respond.
All the best!
The maximum loss you can make is the amount of premium you have paid. If your position is in loss, you need to study the price action of the underlying, and if you feel it will go in your direction , then you can wait for a day or two.
As option buyer : The nearer you get towards expiry, you lose value as Theta decay (time value of premium) , If you are buying options be sure about the direction of trend and get out as soon as trend is over. So no benefit waiting, better to cut short your losses.