Basic quetion: suppose i buy 1 lot (600 shares) call option viz. Sunpharma feb 900 CE @ 9/-. How it will be settled in the following codition: 1. On expiry day the premium is Rs. 20 and sunpharma rate is 930 in spot market. If i squre off my position before 3.30,what will be my profit and on what price, tax would be calculated? 2. On expiry day the premium is Rs. 20 and sunpharma rate is 930 in spot market. If i did not squre off my transaction than it will be automatecly squred off. In that sitution what would be my profit and on what price, tax would be calculated?
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If you sell the contract before expiry, profit/loss = (Sell premium - Buy premium)* Lot Size. So if you sell it at 20, you’d make Rs.6600 (20-9)600. STT payable will be 0.017% of sell premium turnover. Sell turnover = 20600 = Rs.12000. STT = 2.04 rounded off to Rs.2
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If you let it expire, you’ll receive a credit of (Spot-Strike)* Lot size = (930-900)600 = Rs.18000. The STT would be substantially higher. It’ll be 0.125% of the turnover = (9300600)*0.125/100 = 6975. Here’s more on computation of STT for expired in the money contracts: http://zerodha.com/z-connect/queries/stock-and-fo-queries/stt-options-nse-bse-mcx-sx
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Thanks Venu ji for clarification. One more question. If spot price is Rs. 880 on expiry day than will it be (880-900) -20 x 600 = - 12000? I have to pay 12000 plus taxes?
When you purchase an option, the maximum you lose is the premium you’ve paid upfront which is 9 in this case.
sir who pays the settlement amount when option expires?
The exchange pays through the member.