Comment on STT Trap - Options Expiry - NSE BSE MCX-SX

S V Srinivasan commented on 21 Dec 2016, 12:16 PM


I have written (sold) 7600 PE for Dec ’16 series. Two possibilities:

1. Dec Nifty expires above 7600 (most likely:-)). That means, the option expires OTM and so worthless.
2. Dec Nifty expires below 7600 (unlikely, possible:-(). That means, the option expires ITM with some intrinsic value.

My understanding regarding the STT in the above two cases is as follows: When I wrote (sold) the option, I have already paid the STT on the premium amount. So, irrespective of where Nifty expires, I don’t have to pay any additional STT. I do not have to expressly square-off (buy) the position before expiry, as long as I am convinced that the Nifty will expire profitably for me. (Of course, I can always buy it before expiry, which is recommended, but that is a different matter.)

On expiry, the difference between sell premium and final premium will be credited to my trading account, and the margin amount blocked will be release.

Is this correct? Or is there any other implication depending on OTM / ITM expiry?

Might have already been answered in the above article, but too dumb to figure it out……
Please clarity.

Thanks in advance.
Best regards, with season’s Greetings and wishes for a great 2017.

S V Srinivasan.

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