Zerodha don't allow to hold the position till expiry date. For holding stock option buying position till expiry, zerodha asks for margin almost equal to physical delivery value. So we have to thank zerodha for saving common people.
Yes you are correct. But only upto 2 strike prices from the at the money. I faced the similar problem twice in 2019 and lost huge money. Zerodha or HDFC will warn you for at the money and next 2 strike prices. But on last day suddenly price may shoot up/down and we are put into trouble like this example. Before 2019 all option were cash settled. From 2019 only SEBI introduced physical settlement. Last 2 year no option and future trading.
@@pichaimuthuramachandran9103 sad to know. so this rule is applicable in stock futures also then by logical extension. there it doesn't even matter whether you are ITM/ATM/OTM. If you're long take delivery, and if short then give delivery. Am i right?
this is a rule by sebi, not about zerodha....as the trading member has to deposit cash margin to the exchange on a increasing order from sixth trading day to expiry
@@Ideas4wealthIndia yes but Zerodha also implement this policy on stock option sellers also which is not a rule by sebi but Zerodha does it. This is ridiculous & I had to move my trading from Zerodha to other broker because I sell stock options before expiry.
It's a true story. He was in my feed when he posted the tweet(week back). And bcz I knew you have depth knowledge of the concept ...I tagged you to guide him
Sir this reminded me when I had lost 27 Lakhs in Futures during 2004 crash.... those days no one was there to guide us...you are doing very noble job Sir. Stay blessed. Hope you are getting well Sir, even your Son
PR. Sundar Sir is a true gem. Giving such knowledge for free. This is what I have been looking for. You are a teacher indeed. Thank you so much for this great information. I appreciate you. There are few people in this world who help others without any greed. Thanks for helping us who can't afford courses and webinars.
Happened with me recently .. I was stuck at sunpharma ce and had no knowledge about physical delivery ... It's was only when zerodha sent me multiple mails n messages .. I researched about it and came out of it.. I wasn't able to sleep for 2 days until I square off my position.
I kept on adding fund to my broker account as per margin required each day on the expiry week ... And thankfully on Tuesday I was able to square off my position with 1k profit ... My advice is if the stock is illiquid then plz square off in loss .. dont wait for its price to go up... otherwise it will be a big trouble
Well Said Sir. Close price and LTP is different for many instruments trading worldwide. A Piece of Knowledge: The expected close price can be tracked using the indicator "weighted close(29,y)" on 1 minute chart. Such losses could be avoided using this indicator. It might be useful for few. 🙏
Sir you are the eye opener for innocent traders in India by posting this video I think no one in the globe has presented in such a simple way other than you. Hats off to you . I am following share Markey from 2009. I never came such a clear explanation in social media, the broker should have informed to the guy by 3 20 pm on that day. He is the prime culprit here I feel
Recently I paced a stock buy option three days before expiry . Zerodha has cautioned me if your not taking possession, there will be penalty and advised to take next month option buy.
i thought that the option buyers are always in comfortable zone but after watching this video I came to know that the real sources of risk in stock option buying really it is an eye opening video. Thank you so much sir.
This is a very very very useful video and explains perfectly what happens if we do not square off on the expiry day and ends up in "In the money".. A doubt which I was having for long time and found no one providing the clear picture...Thanks a lot ..
Nice lesson for everyone. Since your experienced in this market. Kindly share this type of experience you came across in your life to us, so the small traders will be more alert and conscious. Thank you, Sir 🎉
Sundar sir, Fantastic point ! Already burned my hands doing the same, but not this huge a loss. Was wondering why there was a huge loss for me, but now i can connect the dots... This is really something that newcomers to options market should know about. As someone already told, trading in indices makes much more sense.
@@jateenjain To my knowledge physical delivery doesn't happen for index options. Also much more liquidity exists than individual stocks. Such a scenario might happen with index option too where the option goes ITM from OTM. And then you will have to pay the losses. As physical delivery doesn't exist the case of auction market might not be relevant with index options. After I have experienced difficulty to sell in individual stocks towards expiry due to liquidity issues, nowadays I never trade on stock options. I stick to index options.
Dear PR Sundar sir, I think as a responsible investment community we should all ask SEBI to rename physical stock delivery only options as obligations. Call option will be called buy obligation and put option will be called sell obligation. It must also be indicated in the contract that buyer has no choice embedded in the option to walk away from excercising it.
@@anandkulkarni2111 it read carefully. You can't call, call options as call obligations because there is no obligation to buy unless it's ITM. Most strike price of contracts expire OTM.
My broker bought the shares on friday itself sir at 471.79 under sblm method. My loss is 471.79-450 = 10 lakh + penalty + brokerage + tax rounded to 12 lakhs
But if u r a option buyer to samaj lo dmat pe 1 lac hai aur option 50000 ke kharide hai ... To whatever no seller no buyer whatever happens ..1 lac se upar kaise jayega aur 10 lakh ka loss hoga to wo paise kahase ayega dmat pe???
@@shrikantborde8143 I have lot of questions same as u. Rules should be made in favour of retail trader and investors not in favour of big bees. Hope sebi listens.
All because of non sense done by SEBI , a fourth grader is sitting on the chair in SEBI , acting arbitrary , previously all options were cash settled .
@@Funnystory50 no : infact the person had bought put option and it ended 35 paise in the money , if it were cash settled then he would have received a pay out at 35 paise per share .
Never thought book definition and Indian options definition is different. Thanks for highlighting this. Net summary, if you are buying stock option, square off atleast 1 day before expire, else just go for index options (where there is no physical delivery)
@@vanshajmaken8299 bhai muze bhi janana he 😅.....aapko kuch information mili kya....nifty or bank nifty me trading karenge our agar buyer nahi mile to kya panelty lagega
Its really seems ..... how these many people are not aware of this risk in stock options. Beginners trade in equity (delivery not intraday), then if you wish then move to index options and stay away from stock options.
The delivery mechanism may be physical agreed. But the option buyer has no obligation i.e he has a choice. What if he chooses not to exercise the option in this case? This is a clear case of cheating on the definition by the exchange. Exchange should make it clear in such cases that these options don't have embedded rights but only obligations. Because people paying premiums want to walk away losing premiums why should they be forced? They should redefine the option buying as only the obligation to either buy/sell stock at a given strike price and mention that they don't have any choice i.e no optionality embedded in the option itself. This is nuts to be honest.
Absolutely: The classic defination of option buying stands diluted/nullified by compulsory settlement mechanism ; it brings back the risk in the game exactly what is was meant to attend or manage
Thanks for the information, I didn't know this! Although I only trade in index option where I don't have to worry about all that, but having additional information is always a good thing!
@@ArunKumar-ve8hv can you please tell me if I have 10k in my account and when I place banknifty option buy order at the same time due to freak trade option value goes to 2k, then due to insufficient balance in my account whether the trade is successful or get rejected? In zerodha..
In option trading there will be equal number of buyers and sellers.This is marked as open inerest. Both buyer and seller enter into a contract with different view on the underlying. One's profit is other's loss. How come this physical delivery come to picture when all open positions can be matched after expiry
A simple way to address the problem would have been to buy futures of same quantity . The positions become opposite and exchange squares F&O net long and short .
Thats almost 42 lots of HINDALCO. Just think how much margin you need? Im sure if he has that much money he would not have bought options in the first place.
uski hee galti hai ITM put ( 460 ya 480 ya 500) buy kyun nahi kiya. OTM buy kiya wo bhi illiquid derivative mein aur ek rule hai option buying ka, kabhi bhi month ke last week tak option buying ki position ko hold mat karo. Ye bhai sahab expiry day tak hold karte rahe.
Sir Definitely You have saved many of us from this . I always buy options in order to hedge and reducing the margin for option selling. OMG How intricate the details are. In-the money, Index vs individual stocks, delivery, obligation,. . I have wondered why last price is not closing price. But never thought it has so much calculations -Averaging of last 30 minutes price and implications. Super Sir. This is very very helpful. Please do more videos on such things where new people to options dont loose money. I can see from the likes that people more people are thankful for this.
Plz guide me, 1) If we buy OTM option if it becomes ITM, it's profit na. 2) if someone has shares in his account, how can he hedge his stock position from downside risk? Physical delivery is problem then... 3) What is benefit of physical delivery??
I encountered similar problem in Apollo Hospitals shorted call 5700 CE 5 lots and bought 5400 ce 4 lots. I closed 5400 call at 5734. Prices started going down. Closed at 5674. But Settlement price was 5701.90. I was forced to deliver 750 shares. Highest traded price in next 2 trading sessions was 5965. I crossed my fingers. Literally in auction anyone can sell at 1186 rupees higher. But i was debited 265 rupees on 750 shares. I could have bought 5 lots in futures on Tuesday evening. On Wednesday and Thursday!
@@harsh8660 in stock options if you don't square off your position on the expiry day, you have to get delivery of the same quantity you are holding. That guy didn't knew this so he didn't do anything but the broker has to do it for him, and as it is T+2 settlement the price of the share of which option he was holding increased by 30 rupees so he had to pay 45000x30. Watch video if you didn't understand
Also there is case of STT which you did not cover...even though you bought PE option and end up in ITM by expiry without squaring off the position and price of stock Does not shoot up after t+2 days you still loose lot of money due to the way how STT gets calculated. STT gets calculated on complete transaction value 45000 quantity into share price which is 450
Sir, I came across this video of your an year back, but that time I did not view your video completely but yes, recently I did Option in Stock but did remember this HIGH RISK to BUYERS, too, it saved me because I came out with minimum loss because of your VIDEO. JUST NOW, watched your complete video. Really many people would have list big money if they are not AWARE OF THIS, assuming that Option BUYERS have minimum RISK. In Index it may be, but in illiquid stocks or even liquid stocks, HEAVY LOSS MAY BE INCURRED. Thank You.
THIS IS WHY I LIKE PR SIR ALWAYS....👍💥 He is a wisdom of stock market & everything will be based on factual.. only a 100% passionate person can do this...
Sir, he was a put option buyer, why he was required to deliver shares when he has not exercised the option? Also if the SEBI mandates there is no exercise option when in the money for options is not it defeat the purpose of what basically the options are? why does SEBI call it options when it looks like a hybrid of futures with basic purpose to defeat buyers.
How about Futures? Is it the same? Can you make a special seperate video for a stock's future and option trading and expiry... Because when your holding becomes away from spot price..we usually don't get any buyer to exit the position.. need to put some light on it
Great vdo Sir. 1 doubt, if retail participation in stock options is low when compared to index options, then if only the Smart money is trading in Stock options, what really happens to those ITM options on expiry day. Pls explain from both buyer and sellers point of view. Assuming majority of the participants in stock options are the Smart money 😎😎😎
But if u r a option buyer to samaj lo dmat pe 1 lac hai aur option 50000 ke kharide hai ... To whatever no seller no buyer whatever happens ..1 lac se upar kaise jayega aur 10 lakh ka loss hoga to wo paise kahase ayega dmat pe???
I was holding 820 ce option for Bhartiairtel. At the day of expiry market price was 680🙈 i didn't even know about this until Wednesday zerodha sent a mail about physical delivery. Before that I was trying to sell this option but Unable to sell it. I was about to loose money but on Thursday i was able to sell it in last moment. After that I stopped trading in stock options...
Thanks Sir..You have explained clearly the position of ITM option on expiry day and the risks in option trade..Can you make a video explaining what happens for Index options..We will be much thankful..
As I have mentioned , all index options are cash settled : I e all ITM options of nifty , bank nifty and Fin nifty are cash settled . No worries about that . It's the stock options which pose a headache for both buyers and sellers on the expiry day . My simple suggestion : please square up your stock options on the expiry day at least one hour before closing , and if you still perceive that the next coming days the stock can move in a particular direction ( up or down) you can roll over the option to the next month at the same time : I e square up the current month option and buy next month option ( call or put option ) as per your expectation / analysis / perception.
Once i bought shares for 10000 rupees.. I dont know what happend... but 2 days later i got 12000... no shares credited in my demat. I got only money back with 20% extra...
Sir, it really eye opener for many of normal people like us. I have a doubt, if this trader did not have 45150 shares in his account i think then he has to purchase 45150 shares @480 rupees, so his loss is Rs 2,16,72,000 and not 13 lakh. please correct me if i am wrong.
Thank you for the valuable lesson. Never realized the consequences for stock option buyer, until you mentioned sir. Grateful for the lesson despite your coping health. Speedy recovery 🙏
Sorry to say it's wrong calculation Case 1 if that Hindalco put buyer have no more money in his Demat Account than How exchange charges ??? Case 2 Which I Experience And also you in Sun TV share where buyer not obligated Any way I bought NMDC FUTURE IN NOVEMBER and forget to square on expiry day ... after T+ 2 days share was given in my demat account and it's not on premium price and not any 20% panlaty....
Sir ease make a video about how to allocate out capital in trading even in the volatile market. Like long term options, monthly weekly ant etc... And also for covered call and secured put please make an video sir
"DO NOT EXECUTE ".OPTION BUYER ALWAYS HAS A RIGHTS TO EXECUTE OR NOT TO EXECUTE .... THANKS SIR FOR YOUR GUIDANCE AND KNOWLEDGE. 🙏 I HAVE A QUESTION AS I STATED ABOVE.,THAT BUYER CAN SAY TO BROKER I DONT WANT TO EXECUTE MY OPTION AND READY FORGET MY PREMIUM. THE OPTION SELLER WILL BE HAPPY AND WILL NOT GIVE DELIVERY AND TAKE PREMIUM.
But what about sebi/nse/broker. they won't be happy. They want you to be trapped so that they can milk money from you (in the form of penalty). Rules are never made in favour of retailers.
this is must watch video for all retailer entered in the market. I was having this question in mind for long time. this video clarifies very clearly about physical delivery. This video should be part of mission options for learners.
One question though, could he have sold any itm/atm/otm put options, the same quantity as mentioned, and there would be no delivery obligation in such a case? Reason being that such sold put options would be set off against those bought. Kindly guide
This turned out blessing for me. I sold few expiry back 2240PE Reliance which turn out to be ITM. I had to take delivery but from there till now reliance has always been trading above 2240. it even went to 2700.
I have been verbose on physical settlement and how broker charge whatever they want for years now. Look at the 20% auction price range. There are case when I am eligible to get money as my opposite side defaulted, I got the money based on the strike price of option & no extra 20% penalty amount which got levied on opposite side. I shall not have any doubt that the difference 20% amount is grabbed by broker.
Long in futures ? how would that help his situation ? The put becomes in the money then and future position too gets in negative ( mark to market ) double vamy for him
@@RajeshSharma-oh2ir for example you buy put option of sbi 450 now the sbin was trading at 400 on expiry day now you go long in futures sbi at 400 thatmeans you are buying at 400 in futures and you have the right to sell at 450 so you were in profit ..... the position is netted off .......
Wow. This is one of the Brilliant Eye Opener video for all Option Traders especially Option Buyers who think that their risk limited to the extent of Premium Value. I haven't seen any other 15 minute video like this which has so much of Crucial information all put together in one place. Brilliant Sir. Pls Keep posting more and more Informative videos like this.👍🏼👍🏼👍🏼👍🏼
According to me this video is worth more than 100000 Rs for me. My name also would have been there in place of that person lost 13 lakhs rs. Thank u so much PR Sundar sir..... You are one of the best teacher of stock market 👏👏👏👏👌👌👌👌
One question though If let's say I sell a Stock option of a certain price then will I have to worry about liquidity when I'm trying to square off my trade in near expiry? Someone please help me clear this doubt
Yes. Always square it off atleast 2-3 days before expiry to avoid this. To get the last 5 or 10p you will be taking a big risk unless you have the capital / shares to take / give delivery.
Sir I have a question Friday and Monday passed when Tuesday is market opens just imagine the Hindalco share will crash and it opens at 440 and close at 430 what happened on this situation please explain sir
i think you are not aware of the fact that , you need margin money to buy stock options on the last week of expiry , that is 20% on friday, 40% 0n monday, 60% on tuesday, 80% 0n wednesday and 100% on thursday. To buy one lot of hindalco shares even it is one rupee you need two lacs margin money and no retail traders can afford it. This is how my broker charges. So i roll over the stock options i buy on previous thursday itself to avoid additional margin
*When it comes to the world of investing,most people don't know where to start. Fortunately, great investors of the past and present can provide us with guidance*
Thanks for valueable information. What will happen in the case of Index options if it becomes in the money after closing. What is the penalty? will it be settled using nifty bees
It's not mistake of option buyer or seller.. It's misunderstanding of physical delivery that created the problem.. Is losing 1 lakh so easy.. I don't understand it all..
Thanks for the information Sir. Definitely it will help many people like us to avoid the risk or losing huge money. Hope everyone in your family is better now.
Broker and exchange have cheated him. This option is called CTM close to money and 3 immediate strike prices are called CtM and CTM options are supposed not to attract physical delivery.
ok, so if I'm getting it right, 2 solutions to counter this scenario: 1) close stock options 1-2 days before the expiry, or 2) have an equal number of physical stocks in your Demat. (although not economical!) right?
Hello sir what in case if he don't have money in trading account, (his capital only one lakh)I mean in option buying broker don't ask extra money right, one lakh is enough to buy know.
Thanks PR sir I was having this doubt for so long Thanks for clearing that up Thats why expert says option sellers should close their positions mostly till 3rd week
My doubt is if this buyer doesnt have 13 lacs in his account (say he has only 5 lacs in his account ) then who will pay the rest of the money? So who lost the money actually?
Very informative video Sir. But I have few doubts. Just imagine a scenario where he goes default, meaning he doesn't have the money. What will happen? Also just imagine the situation of that 450PE seller, when it went in the money how much money he should keep in his account to buy 45,000 shares at 450.
@@mandeepsingh-zg4yr OK. But just imagine, I only had 1 lakh and I bought the PE. Say I don't have any other money in my account. Will I have limited liability or they (broker) come behind me?
Why do through auction market, if the broker knows immediately he can buy from the open market on Friday and get it on Tuesday and deliver. Instead of going to auction market on Tuesday.?
Hey, i wanted to ask what if i buy a stock option and when i want to sell it after few days(out of the money) and there are no buyers in the market or very low open interest?
I am a beginner to Options trading. This was something I did not know or even imagine. Thanks a ton for the video. God bless you. I will square off well before the expiry.
