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What is “Do not exercise” for In The Money Option Contract?

Earlier, all open ‘In-the-money’ options contracts were automatically exercised and cash settled after end of Trading session on expiry day thereby attracting securities transaction tax (STT) of 0.125 per cent but now NSE has introduced a process wherein a broker can opt to instruct the exchange to “Do not exercise” close-to-the-money Option Contract wherein the applicable STT is more than the premium receivable on exchange exercise.

Accordingly, with a view to safeguarding clients from unwanted debits due to Excessive STT - we have opted for “Do not exercise” for all open option positions if the premium is less than STT. Other all option contract will automatically be exercised and cash settled as per the current process.