If you fail to square off your options positions on the expiry day, the settlement will be based on the exchange's determined price. The difference between the settlement price and your entry prices will be reflected in your trading account ledger.
Here's what happens in different scenarios:
1. Stock Options (Physically Settled):
· In-The-Money (ITM) Contracts: If stock options expire, ITM, they are physically settled, and you'll either receive or deliver the underlying shares at the strike price. STT is charged on exercised contracts at 0.125% of the intrinsic value, and brokerage is charged on both sides.
· Out-of-The-Money (OTM) Contracts: OTM option contracts expire worthlessly, resulting in the loss of the entire premium paid. Brokerage is charged only on the buying side, not when contracts expire worthless on expiry day.
2. Index Options (Cash-Settled):
Bought
Index Options:
· ITM Contracts: STT is charged on exercised contracts at 0.125% of intrinsic value, and brokerage is charged on both sides.
· OTM Contracts: OTM index options expire worthlessly, and brokerage is charged only on the buying side.
Shorted
(Sold) Index Options:
· STT is charged only for the sell-side (initiating the short). There's no STT impact on expiry.
· Depending on the moneyness of the option contract, the trader keeps the premiums received.