Physical Settlement of Options

Hi Can you please clarify on the below query:-

  1. I sold Infy 1280 PE for Jan Expiry by collecting 10 Rs Premium.
  2. On Expiry Stock is trading at 1200.So On expiry value of the PE which I sold for Rs 10 will expire at the intrinsic value of Rs 80 ( 1280-1200).
  3. I am happy to receive the delivery of the stock at my contracted strike price of Rs 1280.
  4. In above situation what is my obligation at expiry if I let the Option expire as ITM.

My understanding is I will need to pay 600 ( Infy lot size) X 1280=768000 plus any brokerage plus STT on intrinsic value . Is this understanding correct ? What will happen to the intrinsic value of the PE I sold. Do I need to pay intrinsic value as well ?
Your early reply is highly appreciated.

As you are holding Short Put, you will be obliged to take delivery of shares at 1280, you will need to pay 1280 * 600 = 768000 plus brokerage and other charges. You can learn more about physical settlement here.

No, ITM options get exercised but expire at 0 value. The strike price of the contract will be your buy average price of the stocks, as stock is currently at 1200 and you are buying at 1280, you will essentially be making unrealised loss of Rs. 80 per share.