What if I dont square off my short options on expiry

Tried searching for this and all of the answers were regarding long options that expired either ITM or worthless. My query is the reverse…what if I had shorted a stock option and on expiry day I am in profit (for example say I shorted an option at 5 and at expiry it was at 0.05 or 0 or whatever).

Now if I did not square off my long positions, then I would be forced to purchase the lots I had bought - in cash. What happens for short options? Will it be automatically squared off?

I hope this helps you. Since you had shorted an option and in profit at the time of expiry, the option will be ITM.

Thanks for the reply Ajay. But your bit abt my option being ITM at expiry seems to be wrong. For example say I short a reliance put of 1000 strike price and if at expiry reliance closes abv 1000, then the put option would be OTM

It seems u can only hold ITM options for delivery and OTM options (if short) would get squared off in profit

Yes, This is correct.

@ajaybgowda Is this default now as per latest SEBI guidelines or people still have the right to excercise for delivery?

Hi @Vijay3 All index options are cash settled whereas ITM stock options are physically settled compulsorily and ATM/OTM are cash settled(seller receives the premium paid by the buyer).

Index option cannot exercise bro, only stock options

My question is only wrt stock options. You cannot buy or sell index.

Check this out

In this case If u r in otm at closing, then u will get all of premium of selling side. But u got in otm in this case, ur holding share go less from ur acc, and if u have not sufficient shares, then u will face huge penelty