Hi, I would like to how settlement happens in case of option selling. Let’s us I have sold call option. So the premium will it credited to my immediately or will it wait for export date to see if buyer is exercising the option? Also let us say if contract is going against my favour , and buyer wants to exercise the contract, I have the amount but not underlying stocks, what will happen if buyer wants to settle but having the stocks? I have read the documentation and video for last couple months but before trying any selling I wanted to know the actual transactional process as how it happens. Any link or details will be helpful.
When you Sell an Option, the premium is immediately credited to your account, this you can use to take Long Option position in same segment on T Day, from next day onwards you can use it wherever you want.
If your Short Option position expires ITM, as you have Shorted Call Option, you will be obliged to deliver underlying shares, not having underlying shares will result in Short Delivery, which will attract penalties, you can learn more about Shirt Delivery here.
Would also suggest you to read this post, which will help you better understand physical settlement process.
Thanks for the information, @ShubhS9.
If the underlying shares are pledged, and there is a chance that the sold call option will end up ITM, how many days before options expiration should the shares be unpledged in order for the situation to not result in Short Delivery?
If you place an unpledge request before 2 pm, the stocks will be available for trading on the next day. Explained here. So if you place an unpledge request before 2 PM one day before expiry, you’ll have shares for trading on the day of expiry.