having a query regarding pledged shares margin -
suppose i have 7 lacs in my account. out which i bought 800 shares of XYZ @ 600, and sold 680 CE @ 20 with 20 days to monthly expiry. the total margin used for this transaction is 4,80,000/- for cash and approx. 2,00,000/- for selling call option, which is 6,80,000/-. and i want to hold the position till expiry.
now, 2 days prior to monthly expiry, the margin required to hold sold call option gets increased from 2 lacs to 5 lacs. to adjust this margin i pledge my same XYZ shares and get collateral margin to adjust the amount to 5 lacs so that i can hold the position till expiry day.
now,
scene 1- sold call option stays OTM till expiry and premimum decays to zero, i keep all the premium amount and my pledged shares remained pledged.
scene 2 - sold call option becomes ITM as the price of XYZ stock reaches 700, so now i have to deliver the shares during exercise process.
(a) so will my pledged shares will automatically be debited from my demat account during excercise process and all the margin regarding shares holding and option sold will be settled automatically ,
(b) or i have to manually unpledged the shares and manually cover the call option in loss and then sell my shares in normal market.
out of (a) & (b), what will happen. and what is the best thing to do in scene 2.
thanks in advance.