How can I exercise my options at expiry, and how is P&L calculated?
All In-The-Money (ITM) options are typically auto-exercised by the exchange at contract expiry. The Profit or Loss (P&L) from exercising an option is calculated as the difference between the exercise settlement price and the option's strike price, multiplied by the exercised quantity. Do remember, any statutory levies and taxes will apply.
For example, If you have a call option with a strike price of ₹90 (₹3 premium paid) and the underlying stock closes at ₹100 on expiry, your profit (before any fees or taxes) would be ₹7 (₹100 - ₹90 -₹3) per share.
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What will happen if I don't square off my Options contract on the expiry day?
If you overlook squaring off your options positions on the expiry day, the position will settle based on the exchange's determined price. The difference between the settlement and your entry prices will reflect in your trading account ledger. ...
What are Options, Premium, and the Strike Price?
An option is a contract that provides the buyer with the right (but not the obligation) to either buy (in the case of a call option) or sell (in the case of a put option) an underlying asset. This transaction takes place at a predetermined price ...
Can an option buyer exercise their right any time during the contract's duration?
No, the option buyer is only able to exercise their right upon the contract's expiry. For instance, Ms. Mehta acquires a put option for Bajaj Auto with a ₹3,000 strike price, set to expire in three months. Even if Bajaj Auto shares drop to ₹2,900 ...
Can only a portion of the options contract be exercised?
The exchange exercises options in their entirety. Partial exercise isn't an option. for instance, if you own an options contract for 100 shares, all 100 shares will be exercised together. You cannot choose to exercise only 50 of them.
Why can't I use the options premium received from selling the options contract?
As per the exchange regulations, there are new rules regarding the availability of options premium received from selling in-the-money (ITM) and out-of-the-money (OTM) options. Here’s what you need to know: Collection of Net Option Value for In/Out of ...