What Happens if I Don’t Square Off My Options Before Expiry?
On NSE, open options positions that are not squared off by expiry will be settled automatically by the exchange. The final outcome depends on whether the option finishes in the money (ITM) or out of the money (OTM) and whether it is an index option (cash settlement) or a stock option (physical delivery when ITM).
What actually happens at expiry?
- Auto settlement: The exchange uses the official settlement price on expiry to determine whether your option is ITM or OTM and then settles it automatically.
- Index options: ITM positions are cash-settled. OTM positions expire worthless.
- Stock options: ITM positions go to physical delivery. OTM positions expire worthless.
- No early exercise: Options on NSE follow European style, so exercise happens only on the expiry date.
- Ledger impact: Profit or loss is posted to your trading ledger after settlement, subject to taxes and charges.
If your option is ITM at expiry
- Index options: You receive or pay the intrinsic value in cash based on the settlement price.
- Stock options: You may be required to deliver shares or take delivery of shares depending on your position.
If your option is OTM at expiry
- The contract expires worthless.
- Buyers lose only the premium paid.
- There is no physical settlement and no further obligation.
Can I exit earlier instead of waiting for expiry?
Yes. You can square off during market hours any time before expiry by taking the opposite position. Your P&L will then be based on the difference between your entry premium and exit premium rather than the settlement price.
Quick P&L reference for buyers at expiry
- Call buyer P&L: (Settlement Price − Strike − Premium Paid) × Lot Size
- Put buyer P&L: (Strike − Settlement Price − Premium Paid) × Lot Size
Note: Brokerage, STT, exchange and clearing fees, stamp duty, and GST impact final payout. Always review the contract note.
Operational notes you should not miss
- No partial exercise: Contracts are standardized by lot size. If ITM, the entire lot is exercised or assigned.
- Funds or holdings readiness for stock options: Near expiry, ensure funds to take delivery on ITM calls or shares to deliver on ITM puts. If you do not want delivery, square off or roll your position before the cut-off.
- Broker risk controls: If funds or shares are insufficient near expiry, your broker may reduce or close positions as per risk policy. Penalties can apply as per exchange or clearing rules.
If you do not want delivery on ITM stock options, square off or roll before the cut-off and always reconfirm current contract specifications and charges.
What If...
| Scenario | Solution |
|---|
| I do not square off an ITM stock option | Physical settlement applies. Be ready to deliver or receive shares or exit before the cut-off. |
| I do not square off an OTM option | It expires worthless. As a buyer, loss is limited to the premium paid. |
| My option is ITM before expiry and I want to act now | Early exercise is not allowed. Sell the option in the market if you want to exit early. |
| I lack funds or shares for ITM stock options | Possible delivery shortfall or penalties or broker risk-driven square-off. Close or roll proactively. |
| I try to exercise only part of my contract | Not possible. Standardized lots are exercised in full if ITM. |
| I miss the expiry cut-off | Auto settlement applies at the exchange settlement price. |
Last updated: 04 Nov 2025
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