What is the difference between square off and exercise an Option?

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When you take exactly opposite of your existing position, it is called squaring off.

Let's say, your existing position is BUY Call Option on Reliance. Now if you SELL Put Option on Reliance with same strike price, lot size and expiry then you're squaring off your position.

You exercise an Option, when you want to take delivery of the underlying stocks, commodities or currency of the Option.

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NSE Trader
1. NSE Trader  Mar 23, 2020 12:22 I Like It. | Report Abuse Reply
You'll have to sell a Call option to square off the Call option that you bought. When you buy the put option with the same strike, that means now you have one Call, from the initial trade, and one Put.

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