The options contract will be settled physically if its ITM (in the money). On the other hand, the contracts for which delivery based physical settlement doesn’t happen, the below mentioned effects ensue.

If you have purchased options –

  • ITM (In the Money) – STT on exercised contracts will be levied with the rate of 0.125% of the intrinsic value and not on the total value of the contract. 
  • OTM (Out of the Money) – OTM options, in contrast, will expire and you will lose the entire amount that you have paid as premium.

In case, if you have shorted options –

STT for options is only on the sell side, which implies that you would have paid the STT while initiating the short. So, there’s no effect of STT on expiry. Based on the moneyness of the contract, you will be able to keep the premiums you have received.