I have one query.For eg. If I have sold CIPLA 900 PE at a premium of 10 and on the day of expiry CIPLA stays at 850 then my option will expire ITM and I will have two options to square off this position :
Option 1 : I take the loss (900-850) x Lot Size = 32500/- and square off the position before expiry.
Option 2 : I take the delivery of stock CIPLA at Strike price of 900 .
Now my query is if I take the delivery of CIPLA at 900 then I will not have to bear the loss of 32500/-
CIPLA Shares will be reflected in my Demat account at the price of 900 and there will not be any further loss/charges ?(Maybe a Virtual loss of CIPLA 900 minus CMP of CIPLA will reflect in my positions )
What I am afraid is that I have to bear the loss of 32500/- also while taking physical delivery of CIPLA shares.
In this case, it will be ITM and when you close the position the premium will either increase or decrease. You need to consider that - not the strike price.
You’ve sold it at a premium of 10 so if the premium changes from 10, the P&L will be the difference of 10 & LTP i.e (10 - LTP).
Your interpretation is right, the shares will be delivered at Strike Price i.e 900 and your loss will be unrealized. But for taking physical delivery there are charges associated, which have been explained in detail here.