I think we are saying the same thing just in different wording.
Even if they are called options it doesn’t feel like an option because:
I read about the guy who HINDALCO puts. Looks like an accident waiting to happen every expiry. I myself never wait for auto square off or hold stock F&O till expiry. But one unsuspecting day this could have happened to even the best of people and wiped off his whole savings.
It can’t be squared off if there’s no liquidity and as per the current rules, it will be exercised if it is ITM on expiry.
@RadiO_EPISODO, as @Suyash.K said, if there is no liquidity, you won’t be able to square-off your position and you will have to take delivery of underlying shares.
Coming to your second query:
ITM options get exercised but expire at 0 value. The strike price of the contract will be the buy/sell (average) price of the stocks and difference between the average price and CMP will be your P&L.
Brokerage of 0.25% of the physically settled value will be applicable and STT will be applicable at 0.1% on the contract value.
You can check out more details here.
What’s the problem with cash settlement? Why’s it not in the list of potential fixes?
Hi,
Will this approach work? If he couldn’t sell his itm put option on the last day of expiry then he could buy same lots of call option for the same strike price and same expiry. So both will get cancelled out and no physical delivery would be required. And going forward avoiding buying/holding stock options near to expiry.
Let’s say someone had Hindalco PUT 450 one lot 1075 quanity. Let’s say Hindalco exipires at 440. So its 10 rupees ITM.
now if the person doesn’t have Hindalco shares in his account. How will various charges accrue to his account.
to start there is a profit of 10*1075 which is 10750 rupees, So will he loose the entire profit, or after short fall penalties etc., will he still be making profit.
??
Buying options is not allowed on last two days of expiry. But to net-off your obligation, you can take position in Futures.
Obligation for Short Put (take delivery of underlying shares) will be netted-off if you have Short Futures position (give delivery of underlying shares).
Here’s how net-off scenarios work:
Thanks a lot 
So if one has bought Hindalco 450 put 1 lot (1075 quantity). And one has also bought Hindalco Future 1 lot. Both expire on say 31st Dec.
So there will be no exchange penalty and no margin penalty in this case, even if put option expires ITM, and there are no shares to deliver in the account??
Seems like it. If we look at closing price of hindalco future on 30-dec-2021, underlying spot price was 449.65 but future close value is 452
for expiry settlement, the future close price will be considered same level as spot price. isn’t it. So if spot expired at 449.65, the future settlement price will also be 449.65 for dec expiry.
(The last traded price of future could be different, but for settlement it would be same as spot closing price on last day of expiry).
You are right thanks
Very good article related to the recent Hindalco 450 Put Trade Fiasco. Must read for all those who trade in NSE Options. This needs to be fixed ASAP, otherwise similar issue will happen in some other counter, during the next expiry.
If I sell otm put option and it expired in the money and i have not squred off. If i am ready to take delivery, what will be the charges and what will happen to the margin paid to sell one lot of put option. pls some one explain this.
Blocked Margin will be released after expiry. You will keep the premium and will be assigned shares at strike price. Delivery brokerage will be 0.25% plus taxes .
will all the margin be released except taxes or the intrinsic value will be deducted from the margin?
