Stuck in 10th Oct Nifty, question about option exercise

#1

Hey guys, so it finally happened, I’m now stuck in Nifty 10th Oct position with loss. The 8th is a holiday for the market, but 7,9 and 10 are still in play.

I am just trying to profit off the premium, I have NO INTENTION to exercise the option.

So, is it possible to keep the option open till the 10th and square off before market closing or do I HAVE to square it off on the 9th itself?

As I said, I just want to play the premium, posting this thread just to make sure there isn’t any penalty/additional charges for squaring off position on last day BEFORE market closing.

Thanks.

#2

There is nothing called exercising or physical settlement for Index options

#3

Yes, but as I understand it, you need to have difference of current price/strike price in your account, isn’t it? I don’t want that to happen, remember reading somewhere that the exchange does that automatically on the day of expiry if the position isn’t square off before market closing.

#4

Can someone help please? This was my first trade where I am taking a loss, what am I not understanding?

#5

If it is NRML position in the index options exchanges or brokers they won’t square off automatically if you have enough margins to carry forward. If can square off whenever you want once u enter the trade. If u don’t square off index options even on the day of expiry (NRML ORDER) and the option u have ITM It’s gets cash settled with exchange. If it is OTM option expires worthless

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#6

I am very new to all this, so I don’t think I got your post in its entirety, but I think you’re saying I can square off the position whenever I went, even on the date of expiry.

If don’t close the position before market closing on date of expiry, the option will expire worthless if the position is in loss; OTM, and if it’s ITM, the exchange will exercise the option and give me the difference in current market price and strike price of option, is that correct?

#7

What you mentioned in your previous post is for futures I think, if you have BUY Option position, there is no extra margin (leverage) taken. So there is nothing you need to maintain in account or anything.

What you mentioned in this post is right.

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#8

Yeah, I have BOUGHT nifty CALL option, not futures. Thanks for confirming, I’m glad I can square off the position even on the day of expiry :slight_smile:

#9

I strongly suggest you first learn before jumping in trading options.
When you buy options - you pay upfront. After that you are not required to keep any money in account.
Also " in loss" do not mean OTM
If you buy 11600 call for 200 and nifty settles at 11650 on expiry. You will be in 150 loss and still your calls are ITM and not OTM

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#10

Hey, thanks for your comment. Yeah, I knew that OTM means below the strike price of your option and ITM means above the strike price. Sorry for not being clear in my comment.

I just wanted to know whether a position can be squared off on date of expiry as there is a lot of volatility on that day…

I would never let the option exercise, regardless of whether ITM or OTM :slight_smile:

#11

yes you can. Only issue is when your strike is deep itm or otm.
Deep ITM - you are in huge theoretical profits but as there is no liquidity you wont get a buyer at proper price. If you have sbin options which are in deep itm. now you do not have money to get delivery of shares or shares in demat to give delivery. you will be forced to square off. Big players will take advantage of this and will offer you much less price than intrinsic value. you have no choice, broker will anyway sq off your position.

Deep OTM - you have already lost whatever was there to loose. Now you can salvage 1-2 rs on expiry day or let your position expire worthless.

If your bought options are OTM on expiry and you let it be, that doesn’tt mean you have exercised the option. Only ITM options are exercised.

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#12

Thanks for taking the time to write this, I really appreciate it! :smiley: