Physical Settlement of ITM Sold put option

I have created a short straddle on NTPC 100 strike price.I sold 100 PE @ 10.45. On the expiry if 100 PE sold option remains in the money for eg. at 95. and in case of no seller if i am not able to sqaure off the position and decide to take delivery of Stock What will be the cost to me. Please also mention all types of charges ,STT etc.

What will be cost including all charges and cost of Buying that Lot.

The cost of buying that lot will be Strike Price * Lot Size of NTPC, and for physical settlement brokerage of 0.25% is charged on physically settled value, all other charges remain the same as those for Equity Delivery.

Cost of buying will be : 100*5700=5,70,000/-
If premium of sold PE is 10 Rs.
Net Buying Cost:5,70,000-57,000=5,13,000/-

Is the above right correct me if i m wrong

Let us assume if it expire on 95.
What will be the physically settled value and how will be the STT calculated.
Will it be 0.125%of 100 * 5700
Or 0.125% of 95 * 5700

Premium you have paid isn’t counted in cost of taking delivery of shares.

So cost of buying will be 100 * 5700 = 570,000 not 513,000.

STT of 0.125% is charged on Intrinsic Value of the Option, you bought 100 PE and NTPC closed at 95 on expiry so, Intrinsic Value is Rs. 5, STT will be charged on 5 * 5700.

Physically settled value of your contract will be 100 * 5700 = 570,000, on this there will be brokerage of 0.25%.


Cost of buying will be 100 * 5700=5,70,000
Brokerage will be 0.25% * 5,70,000=1425
Stt will be 0.125% of 5*5700=35.62

And what abt the premium received of 10*5700=57,000.

It will be mine, isn’t it

You get to keep the premium you received, here you Sold at 10 and it expired at 5, so you only get to keep Rs. 5.

Also, just want to correct myself here. If you are Seller of Option, there is no additional STT of 0.125% charged if the Option expires ITM, as you have already paid STT when you sold.

How this 5 Ruppes premium i have to return.

I m not squaring off

I m exercising. So I think it shd be mine.

Coorect me if I m wrong

When you Short an Option, you get to keep entire premium only if it expires OTM, as it expires worthless. If it expires ITM it has some value and you only get to keep the difference. In your example, you Shorted an Option at 10 and it expired with value of 5, so you will only get to keep Rs. 5.

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Squaring off will also be same.

No stt ( as buying the sold position)

Yes, also when you square-off there won’t be physical settlement.

I think complete Rs. 10 he will get to keep even if NTPC ends at 70 or 60 if he is not squaring off his sold put option because exercising the option means he is taking delivery of shares at 100.

Yes if you take delivery against your put, you get to keep full premium.

But this 0.25% is so prohibitive you would be better off squaring off the put at Rs. 5, and buying sharing in cash (which will mean zero brokerage).

I also thinks the same. Because in no other way I am returning the received Premium.

So I think in case of exercise. I shd get the full premium which I get while selling the put option.

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what is .25% charge while excersing? i read there is no stt while excercing?

are u excercing or square off+ buy in cash? which is best pls suggest?

Please see
In this please see heading;;
What is Zerodha’s policy on physical settlement of Equity derivatives on expiry.?
see sub heading;
In this it is clearly givenas below;;
Call/Put options;;ITM options get exercised but expires at 0 value.
THis means ,in this example, the seller of option can keep the original premium received,Rs.10
Please clarify.Your clarification will have severe implications on option sellers.Please guide us properly.

Kandi irrespective of brokers option rules clearly states option writer always retains original premium collected no matter option expires worthless or ITM

His net loss is hence,
actual loss - premium value+ applicable brokerages

You keep the premium received. Above I was talking about net scenario.

As @ksksat has mentioned.