Question:
I have bought put option on a stock(ACC) first time. I am using ICICI web trade. I do not have shares in my demat account. To exercise option(if it is less than strike price), Do i need to buy shares and then exercise(sell) it or i dont need to do anything and money will be credited to my bank when option expires. If you can give detailed info then it will be great?
Answer:
If the expiry day price of the Stock on which you bought the put option is less than the Exercise or strike price then the difference will be credited to your account less the transaction costs.
You need to write an option now only if you are in a hurry to realise that profit. Then if the price move up again you will have to buy with the premium you received to achieve more profit. These are European option that is facilitated in India. If it was American options you could have closed your position prematurely without waiting for the expiry day with a write to close. Good luck.
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