Square before expiry

Do i have to square off debit spread if bought opiton is ITM and sold option is OTM at expiry ???

Whether to square-off the position or not is up to you.

If you are talking about Index Options, then the Option expiring OTM will expire worthless, while the ITM Option will be settled at intrinsic value and any profit or loss you are making will be credited to / debited from your account.

For Stock Options, as one option as expired ITM and the other OTM, there will be no netting off of the physical delivery obligation.

For the Long ITM Option, depending on whether it’s Call or Put, you will have to take or give delivery of underlying shares.

You can check out this post for more information.

1 Like

In last week of expiry margins increase. Does the margin needed increase ,even if I buy Spreads??
Or is the margin increase only for naked options…???

Also another question…

In debit spread ,Is there STT charges if the bought option is expired ITM and sold option is OTM , even if i buy a debit spread??
or is STT only for naked options bought that are ITM on expiry ???
Another question

In my debit spread, what if the bought option is ITM and the sold option is OTM …And I want to take my profits …BUT I cant square off the OTM sold option ,because of No liquidity . …
If I square off ITM option bought, then my sold OTM option is exposing me to big risk…Do i have to then find a way of hedging it by buying another OTM option or in any other way???

The margins will increase even if your position is hedged.

STT charges will be applicable.

Right. To cover your risk in short position, you’ll have to buy the option.

1 Like