How options settle at expiry

At expiry the premium you paid or received meets one simple number: what the option is actually worth at the final price.

The settlement rule

An index option expires at its intrinsic value, worked out from the index's closing price on expiry day:

• Call: closing price − strike, or zero if that is negative.
• Put: strike − closing price, or zero if that is negative.

All time value is gone by then. Index options in India settle in cash, so no shares change hands.

A real four-leg NIFTY example

This trade was entered on 4 May 2026 at 09:15 for the 5 May 2026 expiry, one lot of each at a lot size of 65. NIFTY closed at 24,032.80 on expiry day.

Working through each leg

• 24,100 CE: the close is below the strike, so it expires worthless and the seller keeps the whole premium.
• 24,100 PE: 24,100 − 24,032.80 = 67.20. The seller collected 75.15, so keeps 7.95 points × 65.
• 23,900 PE: the close is above the strike, so it expires worthless and the buyer loses the premium.
• 24,300 CE: the close is below the strike, so it also expires worthless.

This position is a short iron butterfly: a sold straddle with bought options on each side that cap the risk.

Exiting before expiry

You do not have to wait. Closing early locks in the difference between your entry and exit premiums, and any time value still in the option is part of that price.

Stock options are different

Stock options in India are physically settled. If you hold an in-the-money position through expiry, you may have to deliver or take delivery of the shares, which can need far more money than the premium. Check your broker's rules well before expiry.

What this example leaves out

These figures exclude brokerage, taxes and exchange charges, and margin. Real results are lower than a simple calculation suggests, especially for strategies with many legs.