What happens to an option contract on expiry day?

On expiry day, every open options contract gets settled based on its final status: if it’s in-the-money (has intrinsic value based on where the underlying closed relative to the strike price), it typically gets automatically exercised and cash-settled for most index and stock options in India, with the corresponding profit or loss reflected in your account. If it’s out-of-the-money (no intrinsic value), the contract simply expires worthless, and an option buyer’s loss is capped at the premium originally paid, while an option seller keeps the full premium as profit. Trading in a specific contract typically stops at a defined cut-off time on expiry day itself, after which no further buying or selling of that contract is possible, only the settlement process runs. You close out or roll over positions you don’t want automatically settled well before the cut-off, since letting an option run into automatic settlement, especially a deep in-the-money one, can trigger unexpected margin requirements if it converts into a physical delivery obligation (relevant mainly for certain stock options rather than index options, which are cash-settled).