Quote:
Originally Posted by nda1
Dear Sir
Could you please tell me what is the exercise price whwn we exercise the call option bought by us. ie is the spot price at the time of exercise or the final settelment on that trading day, with an example please.
Regards,
NDA
|
If you exercise an option on a particular day, the spot price at the end of the end will be considered.
For example, imagine you have IFCI 55 call option, that expires on 26th July 2007.
Now on 16th July, suppose the price of IFCI has moved up to Rs 75.
There may be no buyers for an option, that is so deep in-the-money.
Thus you decide to exercise your call option.
If the closing price of IFCI on 16th July is Rs 75, exercising the option will bring you an inflow of Rs 20 per share.
As Indian stock options are cash settled, you will get the
net difference between the
spot price and the
strike price (Rs 75 - Rs 55).