We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
There are no key takeaways in this chapter 🙂
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1. Introduction to Options
00:08:41
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2. Option Jargons
00:06:56
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3. Long Call Payoff and Short Call Trade
00:10:05
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4. Put Buy and Put Sell
00:08:30
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5. Summarizing Call & Put Options
00:05:26
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6. Moneyness of option
00:07:10
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7. The Option Greeks – Delta
00:11:25
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8. Gamma
00:05:52
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9. Theta
00:07:39
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10. Vega
00:04:43
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11. Options M2M and P&L calculation
00:04:39
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12. Physical settlement of futures and options
00:06:25
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13. Bull Call Spread
00:06:14
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14. The Straddle
00:06:27
I purchased x shares 1000 nos.( equivalent of one lot ) for Rs.1000 per share in equity segment.
I sell call option at strike price 1050 for premium of Rs.80.
During contract expiry the underlying value becomes Rs.1200.
Kindly clarify what will be my profit / loss.
Also clarify whether brokerage charges will be charged for selling as well as for equity delivery.
Also kindly clarify whether entire margin paid will be re-credited into my trading account or any part only.
Thanks.
Check this chapter – https://zerodha.com/varsity/chapter/options-m2m-and-pl/
Hello ,
By mistake I sold CE (which is illiquid) instead of PE of stock but to hedge I bought future of stock same expiry .
Real Life example 🙂 :
Aarti Ind was at 750 at starting of month , I want to sell it’s Aug PE but by mistake sold it’s Aug CE at 50 [Contact is illiquid only single contact ]
To hedge I bought Aarti Aug Future at 749.50
But on the day of expiry Aarti trading at 799
I do have enough margin available till end but just like to know is what will be extra charges after 0.1% of STT of net delivery values in my case it will be 799 X 850 + 700 * 800 ‘s 0.1% if I am not wrong
I had purchased 4 lot for futures for about 4 laks,but i didn’t exist on the last day.what happens in this case.
The futures contract will be settled physically if its a stock future, cash-settled if its index futures.
Give your views about physical settlement of currency option trading on the expiry day. Is it same as that of index option trading i.e. cash settlement.
What exactly is physical settlement?
Do we need to do anything extra?
Unable to understand this concept
Sourav, I’ve explained this in the chapter itself. I’d suggest you start with understanding cash settlement and then move to physical settlement.
Hi Kartik,
This is a fantastic series and cleared one critical doubt I had regarding settlement in cases when you are long on a stock’s futures and hedged with a put option.
My query is, is it safe to hold such a hedged position till expiry? And does the settlement happen automatically on expiry or do I need to do it myself? I use Kite.
Thanks,
Nikhil
Yeah, there are no issues with holding hedged positions to expiry. But you can even exit just before the expiry if you are uncomfortable.
Hi
If I bought reliance CE of 2500 and on expiry underlying expires ITM as I forget to square off my position before expiry and there isn’t sufficient funds in my trading account to take delivery than what happens?
Shubham, such positions will be squared off before it can hit the expiry day.
I purchased one lot of weekly expiry of Nifty19300CE with a premium of rs:6200 approximately ,then what about the premium amount for In The Money call option on expiry day?please explian…
All ITM option will be cash settled, Ram.
Hey Kartik, Thank you for this amazing video
Was super confused about how the whole settlement thing works. Still have a few doubts. When options are physically settled does that mean that I get to buy the shares at the strike price or whatever the current market price is ? In futures physical settlement do we get to buy the share at the price we bought futures for or whatever the current market price is? Because if it is current market price, I don’t see what benefit there is to physical settlement of futures. Also How are commodities settled? Will I have to buy the commodity physically or is it also cash settled?
Thanks, Shaunak.
1) All settlements at the strike price
2) Settlement price (upon expiry), as futures are settled on a mark-to-market basis
3) They are cash settled for all practical purposes.
Thank you so much for clearing my doubt. Ig the only people who physical settlement helps is probably the big players who want to buy large quantities of stock but not be affected with the large price movement that comes along with purchasing huge quantities. New to F&O so might be wrong but anyways thank you so much for the lessons it really helps a lot of people to get a better understanding of the market and finance in general
Yes, if someone really has the intent of taking delivery of stocks, then, physical delivery helps. Else, you are better off with just squaring off your position before expiry.
Hello Karthik,
Are weekly stock options physically settled or cash settled
All stock options are physically settled, index is cash settled.
Sir how we have to give delivery in long put “long” means buying and in buying we have to take delivery
In case of long Put, you have the right sell, so give delivery.
can we exit the contract before expiry to avoid physical settlement? if yes, how days prior to expiry ? Also, would like to know what if the contract enters ITM before expiry
Yes, you can do that. You have time till 3:30PM on the expiry day to exit the position. So it is really upto you as to when you want to exit the position.
Hi Karthik
Index options are cash settled. Suppose I sell Nifty call @22000 and buy Nifty call@22100, with the premium difference being Rs.10. Then the maximum loss I can incur is Rs.90 (multiplied by lot size, so say Rs.4500). In such a scenario the margin requirement should only be Rs.4500, but in reality it is about 8-10 times of that. Why is it so?
Thanks again for being an awesome tutor.
Rohan, what if you square off your buy position right?
There is always additional margin required if case one squares off a buy position and leaves a naked sell position. But why do brokers charge this additional margin even when the positions are hedged?
When positions are hedged, you do get margin benefit, Rohan.