What happens if your can't exit your position?

F&O
1

What happens if I have sold some option but I don’t get a buyer and the contract expires?

What happens if I have bought an option but I don’t get any seller and the contract expires?

What happens if I have sold some a Future but I don’t get a buyer and the contract expires?

What happens if I have bought a Future but I don’t get any seller and the contract expires?

2

Index Options (Cash Settled):

If your Option expires OTM, it will expire worthless.
If your Option expires ITM, exchange will settle it at Intrinsic Value.

Stock Option (Physically Settled):

If your Option expires OTM, it will expire worthless.
If your Option expires ITM, it will result in physical delivery, if you were Short Call you will have to deliver underlying shares and if you were Short Put, you will have to take delivery of underlying shares.

Index Option (Cash Settled):

If your Option expires OTM, it will expire worthless.
If your Option expires ITM, exchange will settle it at Intrinsic Value.

Stock Option (Physically Settled):

If your Option expires OTM, it will expire worthless.
If your Option expires ITM, if you were Long Call you will have to take delivery of underlying shares and if you were Long Put you will have to deliver underlying shares.

Index Futures are cash settled, and will expire at closing price of spot (Nifty, Bank Nifty) on expiry day.

Stock Futures are Physically Settled: These too will expire at the closing price of spot on expiry day but Long Futures will result in you to take delivery of underlying shares and Short Futures will result in you giving delivery of underlying shares.

You can read more about physical settlement here.

1 Like
3

Thanks for the explanation

What if I am letting it lapse my ITM on purpose? I am a buyer so y maximum loss should be premium amount * the lot size? Why can’t ITM lapse/expire?

4

Yes, as Option buyer, your loss is limited to premium paid.

In They Money Options have value, How can they expire worthless, in that case.

5

It will result in physical delivery? Can you please explain this point? How do I sell/buy this physical delivery??

6

Can I lapse ATM and ITM options? Or we can only lapse OTM option?