I have sold Feb month expiry P.E of stock but I am unable to close my position as I do not have buyers available. One buyer is available but he is demanding a very high price just because there are no volumes for this strike price.
Can I request Zerodha to forward this position for the next month? If yes, what is the procedure?
@ShubhS9 Can you please help me forward my position to March or April month expiry?
If you want to rollover the position, you will have to do it yourself only by squaring-off the current position and taking a position in the next expiry contract. As there is lack of liquidity this will be hard to execute.
If the position is OTM, you can let it expire. If it is ITM then you’ll have to take delivery of underlying shares. Alternatively, if you do not wish to take delivery of shares, you can net-off the obligation by Buying ITM Put, Selling ITM Call, or Selling Futures.
If I want to take physical delivery for P.E sell position, I will have to buy those many shares?
e.g. Have 4500 P.E call of 1 lot (1 lot = 150). I need to buy 150 shares at the price of 4500 Rs when I take the physical delivery correct? I only need to ensure I have that much balance in my account
And what about loss? Say suppose I am at a loss of 50k and I take physical delivery. Since option is not M2M, will I have to pay the loss of 50k as well as take the physical delivery? or there wont be any loss since I took the physical delivery?
As you’re holding Short Put option, if it expires ITM, you’ll have to take delivery of underlying shares. You’ll have to maintain amount equal to Strike Price * Lot Size * N. of Lots in your account.
Stock Option expire ITM but will expire at 0 value. You will be delivered shares at Strike Price you hold which will be the buy average for the shares. Also, as you’re an option seller, you will also get to keep the entire premium received. You can learn more on physical settlement here.
Options: All ITM stock options that are held till the expiry are exercised. The exit price used is 0 for the P&L as the stock delivery happens at the strike price.
Did not understand the above statement. Will I have to bear the loss if I take physical delivery of the ITM short PE position? As I said, if I have 50k loss right now, will I have to suffer this 50k loss as well as take the delivery? or there won’t be any loss as I took the delivery?
No, there won’t be loss, as explained above stock option expire ITM but will expire at 0 value. You will be delivered shares at Strike Price you hold which will be the buy average for the shares.
The difference between the CMP and your buy price will be the unrealised P&L.
Thanks, I have sold PE, still, I will have to buy shares for delivery correct? I won’t have any penalties as I dont have that many shares in my demat account
and for the physical settlement, do I need to keep that much amount in my “Available Cash” or "Available margin?
As you have Shorted Put option, you will have to take delivery of shares.
Available cash. Not having sufficient funds will resulting your account going in a negative balance, on which interest will be applicable at 0.05% per day. Would suggest you check out this article, everything has been explained in detail.
Thanks, @ShubhS9 When I take the delivery, my realized loss will be 0 correct? and all the loss will move to unrealized capital gain loss? Can you please confirm?
Right. As I’ve explained above:
Stock option expire ITM but will expire at 0 value. You will be delivered shares at the Strike Price you hold which will be the buy average for the shares. The difference between the CMP and your buy price will be the unrealized P&L.
Also as you’re an option seller, you’ll get to keep the entire premium received.
Also as you’re an option seller, you’ll get to keep the entire premium received.
Do you mean I will get a realized profit of no of lots * premium paid * strike price?
As you’ve sold the Put Option, you would have already received premium (Selling Price * Lot Size * No. of Lots), you will get to keep this amount.
@ShubhS9 I took physical delivery by not exercising the option last Thursday. When will the share start show up in my Holdings? Its already Monday today and I still don’t see the shares
Shares will reflect in your Kite holdings once they are credited to your demat account. The credit of shares takes T+2 working days, however if there is short delivery then it can take up to may take up to T+5 days. Explained here.
@ShubhS9 I got an email about a short delivery from Zerodha. I had short PE so I am taking delivery of shares in my Demat right. Why did I receive a short delivery email?? I am suppose to get the shares and not give the shares
It is to inform you that the shares you’re supposed to receive have been short delivered by the party which was supposed to deliver this. Exchange will now conduct an auction and the shares will be delivered to you in T+5 working days.
You can learn more about short delivery here:
Thanks. At what price will I get the shares?
@ShubhS9 What abt CE buy option? Does that also expire at 0 value? Will there be realized loss for CE ITM buy call? (premium paid * no of lots * strike price) or it will expire 0 and I only need to take delivery without any realized loss.