Stock Options upon Expiry

[Noice]

Good day,

Suppose, a stock is at CMP 500 INR. 1 lot is 100 shares.

I sell 1 x 400 PE and buy 1 x 450 PE

If Stock price stays at 500 INR at expiry, both my positions are OTM and will expire worthless (in which case my loss is limited to bought option 400 PE) ?

In that case If I don’t square off my positions and let them run upon expiry, will I be charged some heavy fees/penalties ?

[ShubhS9]

@Noice

Suppose, a stock is at CMP 500 INR. 1 lot is 100 shares.

I sell 1 x 400 PE and buy 1 x 450 PE

If Stock price stays at 500 INR at expiry, both my positions are OTM and will expire worthless (in which case my loss is limited to bought option 400 PE) ?

In this scenario, you will lose entire premium paid for buying 450 PE. While you will get to keep the entire premium recieved for shorting 400 PE. Net of premium recieved - premium paid will be your P&L.

Would suggest you read this module on Varsity for better understanding about Options:

Options Theory for Professional Trading - Varsity by Zerodha

@Noice

In that case If I don’t square off my positions and let them run upon expiry, will I be charged some heavy fees/penalties ?

There are no charges for letting your positions expire.