@nithin Zerodha’s policy on physical settlement says this:
“If you have 2 open positions on expiry that result in a net-off(Long futures and short call options, short put, and short future, etc) you are not required to give or take delivery for the position. However, there will be STT charged on the long position(s) as this is treated as notional delivery”.
To be adequately clear, let’s consider the following scenarios:
- One long call and one short call on the same underlying stock, both expire ITM. As per the above policy, these should be netted-off resulting in no delivery obligation. STT will have to be paid on the intrinsic value of the long call.
- One long call and one short call on the same underlying stock, one expires ITM and the other expires OTM. There will be a physical settlement obligation on the ITM option. If this ITM option is the long one, STT will have to be paid on the intrinsic value thereof, but if it is the short one, STT would be charged to the counter-party.
It will be great if you can confirm if the above understanding is correct.