There are number of old questions and multiple different type of answers on the settlement of index options. I would like to understand few things with respect to not closing the option trade on the day of expiry. The question is specific about nifty or bank nifty index option and not about stock options.
What will happen if I short or go long on any option and I am not able to close it on expiry day due to liquidity issues or if there are no buyers or sellers respectively?
If I buy an option and it expires OTM without me closing it, what will happen after expiry? Are there any additional taxes or penalty?
If I buy an option and it expires ITM without me closing it, what will happen after expiry? Are there any additional taxes or penalty?
Is there any additional STT for any of the above case?
I would appreciate if someone can answer these clearly.
Upon expiry, if your Option expires OTM it will expire worthless, if your Option expires ITM, it will be settled at Intrinsic Value.
It will expire worthless and you will lose the premium paid to purchase the Option, there are no additional charges.
If your Option expires ITM, it will be settled at Intrinsic Value, and for this there will be additional STT charged at 0.125% on Intrinsic Value of the Option.
Eg. You bought 11500 CE and Nifty expired at 12000, your Option will have Intrinsic Value of 500 (12000 - 11500), on this 500 there will be additional STT of 0.125% ie. 46.875 (500 * 0.125 / 100 * 75 (Lot Size)).
If you are Short and your Option expires ITM, there is no additional STT as you have already paid it when you sold the Option.
You can leave it to expire, exchange will settle it at Intrinsic Value and any profit or loss you are making will be credited to / debited from your account.
Or should i square off the position before 3.30 pm and pay normal regular STT and the brokerage ?
I hope there is no other differences ?
(By the way: what would be the STT if i square off exit before 3.30 pm)
What does your experience and expertise advise us on this ?
What would happen if i request for excercise / donot excercise option etc ?
Or is there any other way around to maximise the profit?
Apologies, I had shared the wrong STT charges. In the above example, when one is trading 100 lots, the STT charges for exercised options is 937.5 and the STT charges for squared-off options is Rs. 375.
So . Not much difference with 100 lots too .
So . I think it doesnot matter whether i exit before 3.30 pm or let it expire after 3.30 pm . On the expiry day?
As u said that if i don’t let the ITM buy option ; squareoff/exit before 3.30 pm ; the only cons is : i have to bear the STT 2.5 times the normal STT .
which i think hardly makes any difference !
What you think on this ?
BUT , let say suppose e.g. : i have taken a hedge position , wherein i have got margin leverage exposure benefit due to the hedgeing .
In this scenario , if i exit/squareoff the above long ITM position before 3.30 pm or at 3.29pm ; to save myself from not paying the 2.5 times of the normal STT ;;; will it result in any peak margin penaty or eod penalty ; because although it is the expiryday , i break the hedge at 3.29 pm whereby the margin require would increase !!!
???
I have one lot of NIFTY 17000 CE which I got at 290. On expiry, what will be the amount returned to my account if NIFTY is at 17250. Either 12500 or 27000 (excluding the taxes)?
ITM options are settled at intrinsic value. If Nifty closes at 17250 on expiry day, 17000 CE will expire with intrinsic value of Rs. 250 and amount equivalent to Rs. 250 * Lot Size will be credited to your account.
To learn more about options trading, would suggest you check out the options trading module on Varsity:
On expiry, the settlement of options will happen according to the final closing price of the underlying, take for example Nifty 50.
If you’re holding Nifty 18500 CE and on expiry day the final closing price of Nifty is 18525, in this case, the option will expire with intrinsic value of Rs. 25. This is the price at which option will be settled.
