What should I do if I get trapped in an option with low volume?

The results of mindtree were declared yesterday. Just during the declaration I saw the prices spike down. The results were expected to be good which led to the rise in shares before the declaration. But seeing the shares fall I bought a slightly OTM PE, expecting the shares to fall due to panic in market participants who expected the shares to rise. The volumes were okay during that stage.

But then today when I saw the prices fall again, I saw there was no change in options premium. I realized that there was absolutely 0 volume in the PE. Seeing the options chain in NSE there was negligible volume in other strike prices too. I did not want to take the risk of physical settlement.
So I decided to exit from my position. But due to low volume I was unable to. Then I took the highest bid price during that time from the market depth and placed a limit order on it and exited from the position in loss.

What should I have done in such a scenario where I am trapped in an option with low volume.

What do you mean by that? physical settlement will happen on last working thursday of every month.

Since you cannot sell the put option you bought, you have the option of marrying it.


True. My thought process was that “Option that has almost 0 volume on a day just after result announcement. Why would it have volume after 15 days. And who knows what the premium would be at that time. Maybe I have to exit at a even bigger loss. This was a situation in which I have no control over. Something where I want something to happen but can’t make it because of an unforeseen issue. So better to exit when I have the chance.”

One extra info. In that put option only 19 transactions have taken place in the whole day.

Is my thought process wrong here. So what should I have done?

@kars For this I have to buy stocks of the same amount. It will be 975(underlying price)*800 (lot) = 7.8 lakhs. This was the thing I wanted to avoid. It is the same as physical settlement.

No, not the underlying stock. You buy future contract, where you get margin benefit due to existing put option.

There are additional cost and requirement of margin. But hopefully, the put option posiion is not requiied to be sold in loss.