Option writing with pledged shares margin

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.


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.

The underlying shares you have pledged for margin will not be debited automatically for physical settlement, to avoid Short Delivery you will have to unpledge these shares before expiry.

ok… thanks for info.

This is what I think will happen. On Wednesday, you will unpledge the shares. On Thursday (expiry day), you should see the shares in your holdings. But this will result in margin shortage. So, either you convert the position to MIS and hold the position till 3:20pm on expiry day or square off. If your position is ITM and want to cover by selling your shares, place a sell order.

is conversion from normal to MIS available in zerodha… i guess not… i tried few times but it didnt work. mis can be converted in normal, but normal to MIS, i doubt that…

if any one has done normal to MIS please guide… in any segment…


If you are trading f&o and using NRML product type but if you square off your position on the same day… Then it will be treated as MIS not NRML …

I think so…