What is the meaning do not exercise the option?

F&O
1

Hi, I am learning F&O and have seen many videos and read about not exercising the option. What does that mean?
I don’t need to exit my position??

2

“Exercising an option” means:

  1. In case of call options: Buying the underlying at the strike price (Call option will be exercised when Spot > Strike)
  2. In case of put options: Selling the underlying at the strike price (Put option will be exercised when Spot < Strike)

When the opposite of the above happens for the respective options then there is no need to buy/sell/settle the underlying. This is called not exercising the options. In case of options not being exercised the maximum loss for option holder is the amount of premium they paid to buy the option.

3

Thanks. And for sell option? we will get the premium profit right?

When the opposite of the above happens for the respective options then there is no need to buy/sell/settle the underlying.
And is there any charge for auto square off by Zerodha? at what time on the last day it will expire?

4

Auto square-off happens only when you use Intraday orders (MIS, CO, BO) to trade, charge is Rs. 50 + GST. There is no auto square-off if you trade using NRML, this is used to carry forward your positions.

When market closes at 3:30 pm.

5

Auto square-off happens only when you use Intraday orders (MIS, CO, BO) to trade, the charge is Rs. 50 + GST. There is no auto square-off if you trade using NRML, this is used to carry forward your positions.

So it means I cant get the benefit of Theta in MIS? The scenario is OTM call buy and sell in MIS to get some premium (Time decay)

6

Open MIS positions are squared-off at 3:25 PM. You can use MIS until then.