Physical settlement of long futures and short ITM option

F&O
1

I am holding a future of a particular stock and have sold one option of the same stock. Suppose if the option expires in the money will there be a physical settlement.

I have already read the zerodha page on physical settlement and as far as I have understood there will be no physical settlement in this case. But I need confirmation because the examples they have given on the page involve 1 future and 2 options.

2

For net-off of physical settlement obligation, below are the scenarios for Futures:

  • If you have Long Futures position to net-off the obligation you need to have position in either Short ITM Call or Long ITM Put.

  • If you have Short Futures position to net-off this obligation you need to have position in either Long ITM Call or Short ITM Put.

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3

I have confusing question. …you said if you we hold future it will net off physical settlement obligation …but to give you an example…

Lets say I sold 860 put for sbilife for 4 Rs. and on expiry day spot goes below strike .lets say 840 Rs. so put premium would be at least 20 Rs. - now if I buy future (on expiry day) lets say at 840 Rs. (or what ever futures price is) …physical obligation will net off but …I will have a loss of latest premium - premium originally received …in this case (20 Rs. - 4 Rs. ) so 16 Rs. will be my loss per share …correct me if am wrong any where ?

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