I have shorted BANKNIFTY and tomorrow is expiry. I shorted when the premium was Rs 10. Now it has come down to almost Rs 1 and since expiry is tomorrow I expect it to go to 0. Now my question is, should I manually go and buy back BANKNIFTY at around 3:15 pm tomorrow to close my sold position or should I just let it be there and does the exchange take care of it? If I do not have to do anything does that mean that I will get to retain the entire premium without paying any additional charges (like STT) ?
If you don’t expect the underlying to move above the strike price at any point by expiry, you need not square off.
This way you will end up saving brokerage and any other charges for transaction. But if you have doubt over the position, better to square off, as you have already made more than 90% profit.
No harm if you don’t square off…
Thank you so much. Yes I am going to leave it as it is.
Is it possible to share below information?
What option did you write? What was the reason behind such decision?
Well, so I am writing BANKNIFTY Options which expire weekly. Since BANKNIFTY is showing bullish behavior, one can go long on BANKNIFTY by selling a PE and pocketing the premium. You can calculate the approx range on BANKNIFTY for 6 days based on VARSITY Volatility calculation: http://zerodha.com/varsity/chapter/volatility-applications/
I believe one can use this to collect premiums 3-4 times a week as BANKNIFTY has weekly expiry.
Thanks for the information. I have a question on the shorting BNF/NF options. This is what I’m planning to do on Monday (21-05-2018).
Thinking flat market & execute below trades (approx capital require 1.5L)
SELLING 25900 CE 24MAY EXP @191 (Friday closed price or Monday Opening)
SELLING 26100PE 24MAY EXP @281 (Friday closed price or Monday opening)
*Assuming the market closes flat on monday **
25900 ce would close less than 191 - assuming 180 closure (191-180=1140=440rs profit)
26100 pe would close less than 281 - assuming 265 closure (281-265=1640=640rs profit)
so in total 440+ 640 rs profit.
the actual question is:
Does Is it mandatory to wait till expiry (Thursday) to buy back the option sold on Monday or i can buy on my demand (Tuesday/Wednesday)?
Question in simple, whenever we do short on the options ; should we need to wait till the expiry day to buy exercise or we can buy back on our need basics ??