Index options are cash-settled, and the implications are as follows:
Bought Index Options:
- ITM (In-The-Money) Contracts: STT is 0.125% of the intrinsic value (not the total contract value) and is charged on expiry. Brokerage is also charged on both transactions.
- OTM (Out-of-The-Money) Contracts: Expire worthless. You lose the entire premium paid. Brokerage is only charged when purchased.
Shorted/Sold Index Options:
- STT is only charged when initiating the short.No STT on expiry. The trader keeps the premiums based on the option's value.