What if there is no buyer for an cash secured PE option ?

F&O
1

Suppose we sell a Put option, example say a strike of ITC 420 PE at a premium of INR 5, Lot size 1 expiring on 1 month i.e.) 29 FEB 2023 and trade.
On the day of expiry 29 FEB 2023 there is no buyer but the underlying ITC share price reached 420 what happens ?
Broker will buy the shares and provide delivery of shares to me ? where does the broker buy from cash market or auction market ?

Another scenario:
suppose if the underlying ITC share price reaches 440, i will be allowed to retain the premium of 5 ?

This strategy of cash secured put is recommended when we are ready to take the delivery of shares by paying the price so i would like to understand the low liquidity situation.

2

As ITC 420 PE expiring at 420 it will be ATM option which is cash settled so you will receive the premium which is 5 rupees.

In this case also the option expires worthless (OTM). You will receive 5 rupees premium.

Physical delivery happens only in case of ITM stock options.

For more visit the following links Varsity and Physical delivery

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