Losses due to STT on Notional Value of in the money Options on Expiry Lesson for Discount Broker

[OPTIONSRIGHT]

I was for one damn sure that close will be below 23900, banknifty hardly went above 23900 let alone stay there to make a close above that
So I don't know what kind of close you are talking about above 23900

Oh, that was MewarLion's post copied. I had also mentioned "And from 3:00pm to 3:22pm, BankNifty was below 23900" in agreement with what you had said!

I don't know why you think someone should buy option at 3 pm on expiry day

Options have always been a sellers market and people without understanding the full details about it trying to make money............ Probably don't deserve that money.

There are full 7-8 days to make money by buying options even weekly banknifty options............. Then why concentrate on 30 minutes?
,Only 30 minutes game and you think options should not have stt imposed?

What kind of arguments are these?

Traders if they know their game stand to make lacs of rupees and you want government to not take pie from that?

Even if they do not make money, it should be a free opportunity for traders and no charges like stt?............ No government can and will do this.

This thought in itself is ridiculous on traders part

An opportunity is and opportunity, without any time frame.
You fail to see the point about STT. No tax on a receipt can be higher than the total value of the receipts. Take even this example, if someone has bought a Banknifty 23900 Put, he gets Rs.11.35 as the final settlement price of Bank Nifty is 23888.65.

His Put Value is 11.35
STT 29.86
% of Tax on his reciept is 263%.

Now 263% tax is ridiculous.

And as for paying to the govt is concerned, this tax is irrespective of whether one makes a profit or not. If he makes money, then there is income tax which is paid to the govt. This STT itself is ridiculous and no other country charges this tax!

 

[princy01]

Oh, that was MewarLion's post copied. I had also mentioned "And from 3:00pm to 3:22pm, BankNifty was below 23900" in agreement with what you had said!


An opportunity is and opportunity, without any time frame.
You fail to see the point about STT. No tax on a receipt can be higher than the total value of the receipts. Take even this example, if someone has bought a Banknifty 23900 Put, he gets Rs.11.35 as the final settlement price of Bank Nifty is 23888.65.

His Put Value is 11.35
STT 29.86
% of Tax on his reciept is 263%.

Now 263% tax is ridiculous.

And as for paying to the govt is concerned, this tax is irrespective of whether one makes a profit or not. If he makes money, then there is income tax which is paid to the govt. This STT itself is ridiculous and no other country charges this tax!

My point is simple

Do try to ask them change law it's fine

But how the hell they are wrong as of now if there is a rule that exercised options will be charged extra stt of whatever rate decided

Why the hell trader is trading in that way he is not supposed to?

And about the law itself, it's like parents saying "in my times at my age I used to be like that"

Kids saying "this is not your time"

Different country different law, you can't compare both, both have different understanding of the markets or options maybe

There was a time when in USA one paid 91% income tax............ You read it right, read that again

So don't justify non sense trading techniques (as of now) to buy at 3 pm, at 5 rs and expect to sell at 40 rs with expectations of no miniscule charges (if option is not excersized) and if you are stuck in it due to NO KNOWLEDGE of the rules then cry about it.

First understand the rules then play the games.

And play it without whining about it

 

[OPTIONSRIGHT]

You fail to see the point.
You are mixing up things. 91% US tax, when it was there, it was on slabs. FYI, they also have a provision of 'Windfall gains tax'.
A tax of above 100% makes things completely different.
It defies normal principles of justice.
One should not be so selfish and remain against injustice!
FYI, I have not lost due to STT!

 

[princy01]

You fail to see the point.
You are mixing up things. 91% US tax, when it was there, it was on slabs. FYI, they also have a provision of 'Windfall gains tax'.
A tax of above 100% makes things completely different.
It defies normal principles of justice.
One should not be so selfish and remain against injustice!
FYI, I have not lost due to STT!

You are missing the point by a mile

I am saying fight for stt removed

But how can a trader whine about losees if he did not learn the rules properly

Rule is there clearly written and told

But people want free and easy money without knowing consequences

Itm options have to be squared off as of now

Period

 

[princy01]

Also don't compare two countries its almost unfair to compare two things when everything about them is different in all aspects of life

 

[bpr]

My 2 cent...
yes it is illogical...it is theoretical tax

Let me explain

the idea stem from the fact you are taking delivery and delivery of stocks is always higher STT (currently 0.1 %) reason being we have LTCG is free. So if somebody held stocks for more than a year then tax gain is free and hence they charge 0.1% STT upfront for stock delivery

In options they charge you 0.05% for selling
and zero for buying

When option is exercised then they say you are getting delivery and tax 0.125% on the underlying price but actually no delivery happens just settled in cash.
You never have the option of holding the stocks and make tax free returns so that higher STT tax is super illogical and daylight robbery by govt.

they should simply be charged as 0.05% STT same as sellers only on premiums ..or no charge at all

How STT calculated Buy ve Sell

• Value of taxable securities transaction relating to an "option in securities" shall be the option premium, in case of sale of an option in securities.
• Value of taxable securities transaction relating to an "option in securities" shall be the settlement price, in case of sale of an option in securities, where option is exercised.

totally unfair ....

 

[princy01]

My 2 cent...
yes it is illogical...it is theoretical tax

Let me explain

the idea stem from the fact you are taking delivery and delivery of stocks is always higher STT (currently 0.1 %) reason being we have LTCG is free. So if somebody held stocks for more than a year then tax gain is free and hence they charge 0.1% STT upfront for stock delivery

In options they charge you 0.05% for selling
and zero for buying

When option is exercised then they say you are getting delivery and tax 0.125% on the underlying price but actually no delivery happens just settled in cash.
You never have the option of holding the stocks and make tax free returns so that higher STT tax is super illogical and daylight robbery by govt.

they should simply be charged as 0.05% STT same as sellers only on premiums ..or no charge at all

How STT calculated Buy ve Sell

• Value of taxable securities transaction relating to an "option in securities" shall be the option premium, in case of sale of an option in securities.
• Value of taxable securities transaction relating to an "option in securities" shall be the settlement price, in case of sale of an option in securities, where option is exercised.

totally unfair ....

its been 13 years since STT was imposed

lets hope its gone , but i am not hopeful yet .

Indian government need money , country doesnt run on thin air , it needs money

then well there is corruption also

 

[headstrong007]

Four Deadly Enemies of Traders–
Ignorance, Greed, Fear and Hope .

 

[MewarLion]

One can understand thread starters lack of knowledge now.
But, before opening a thread for discussion about a topic, first, any member must try to learn the basics...And beginners may get wrong info about options writing..

Do remember that if you are short/written options (sold first), you have already paid STT and it doesn’t matter if you want to buy the options on the exchange or hold them till expiry to square off, there is no STT on the buying side.

Any option writer(i.e selling first) would have already paid the applicable STT. In both the cases which is you buy on the exchange or if you let it expire at Rs 0.05 or whatever price ABOVE ZERO.
You don’t have to pay any STT at all, i.e STT would be zero for you since you had already paid STT when you had shorted the options( @0.05% of the premium, which is negligible).

---------------
Discount Brokers like Zerodha , RKSV , TSO , SAS good enough to handle such novice options buyers. They square off big positions forcefully many times if there is not enough capital to recover the total loss...

@headstrong007 Please read carefully before advising for correction. Option writer had the opportunity to sq off 23900 put @0.05 paise ( Read @0.05 paise and not stt @0.05% ) during market hours in last 30 min. Since they did not do sq off , they finally ended paying Rs 11.35 ( 23900 - 22888.65 ) instead of just 5 paise per share.

Todat i.e. on 20th July 2017 Bank Nifty 24200 put which became OTM even by 03 pm and was continuously OTM in last 30 min still option writer were doing sq off at 5 paise to 10 paise instead of not doing sq off of OTM options. Option write has learnt ? It seems , cannot say about others.

 

[MewarLion]

Brokers asking for the same for many years, SEBI knows it all, but such decisions depend on Central Government only. The tax goes to Government. Still Govt is not interested. Already a lot of traders signed such petitions in change.org. Still no hope..

Smart RMSs square usually square off such positions forcefully around 3:20-25PM @ market price. Still, some novices are creating huge new buy positions in last 10-15 mins with cheap options... Only such huge buy positions are creating the problem...Brokers are flashing such messages for square-off in terminals repeatedly. ..........

But as we all know,
Albert Einstein: 'Two things are infinite: the universe and human stupidity; and I'm not sure about the universe.'

Trading will always remain a dangerous business, bcoz there is no entry bar, no check of the minimum required knowledge in that field...Brokers have to be careful from the stupidity of the beginners...

@headstrong007 Your above post is very constructive and highlight the issue faced by the Traders as well as Brokers. Unfortunately , 23900 Put became all seller and no buyer much before the time Stock Broker do sq off. Stock Broker could not do sq off. Overheard very large discount broker lost 5 million due to such position.