What happens if I do not close an option before expiry?

If you hold an out-of-the-money option to expiry, it simply lapses worthless with no further action needed, and your loss is limited to the premium you originally paid. If you hold an in-the-money option to expiry without closing it, most Indian index options settle in cash automatically, meaning the intrinsic value gets credited or debited to your account without you needing to do anything manually. For certain stock options, though, an in-the-money position held to expiry can result in physical delivery of the underlying shares rather than a cash settlement, which brings its own margin and delivery obligations you might not be prepared for if you weren’t planning to actually take or give delivery of the stock. You generally close positions manually before expiry rather than letting them auto-settle, specifically to avoid an unexpected delivery obligation on a stock option you never intended to physically settle.