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What is the difference between square off and exercise?

April 26, 2017Exercise square

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What is the difference between square off and exercise?

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You square off options position when you want to close your existing position. Square off can be done by taking the exactly opposite position for e.g. if you have initially bought 1 lot of CALL (or PUT) option you can square off by selling 1 lot of CALL (or PUT) option with same strike and expiry. Similarly, if you have initially sold 1 lot of CALL (or PUT) option you can square off by buying 1 lot of CALL (or PUT) option. You may want to exercise your option when you want to take delivery of underlying stock or Index.