Selling illiquid options are there any penalties?

if a option is illiquid and i sell it and someone ends up buying it. do i get a penalty from the exchange or delivery or anything of that sort. or am i going to receive premium at month end irrespective of the fact that it was illiquid when i sold it

There is no penalty.

You will receive the premium as soon as your sell order is executed. Physical settlement is applicable only for stock options and that too when options expire ITM. If options expire OTM, there will be no physical settlement and as an option seller you get to keep the premium received.

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