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

MewarLion

Active Member
#21
Bank Nifty was trading above 23900 on majority of last half an hour , which computes closing prices for settlement . Market Participant in fact all option writer in this Strike price were expecting BANKNIFTY close above 23900 so there were no buyer in 23900 Put Option and all option buyer were standing as seller in 5 paise but could not sq off as there were no Buyer.

@MewarLion
I missed this point completely! I thought you were referring to the Rs.11.35 that had to be paid by the 23900 PE option seller, as against squaring off at 0.05! And from 3:00pm to 3:22pm, BankNifty was below 23900. Futures usually track the average, but there are exceptions!
@headstrong007 Thanks for pointing out.

BTW, few lakhs for discount brokers is nothing, considering the volumes that they are doing. So the authorities will not bother about this. But unnecessary loss is a great loss anyway.

All kind of representation has been made.
@MewarLion
I agree, but that has not produced any useful result.

I feel that the representation had been made incorrectly. I believe that I have enough material on this. I intend to tread a different path, by which people who had their ITM options exercised and charged STT should be able to

GET THEIR STT BACK ALMOST FULLY, ALONG WITH COMPENSATION AND POSSIBLY EVEN A BONANZA!

That is the reason I wanted to know how many would support this cause! I have only asked for people to 'Like' and even for that, there is hardly any response!
@OPTIONSRIGHT You understood correctly and not missed . Some one else missed that point .
 

princy01

Well-Known Member
#23
@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.
I am sure you don't write options, whatever you wrote in the post is almost all wrong

Option writer does not need to cover the options, even if he sells at 5 rs and option closes at 2 rs, he is safe. No higher Stt for him

It's the option buyer who if his options is ITM, needs to make sure that he square off options so that option is not excersized

I sold 24200 put today , I didn't try to cover it at all because it was otm it was going to be zero, but a buyer at even 5 paise if spot had closed at 24200.05, it would have resulted for him as excersized option and he would have to pay high stt for it
 

MewarLion

Active Member
#24
I am sure you don't write options, whatever you wrote in the post is almost all wrong

Option writer does not need to cover the options, even if he sells at 5 rs and option closes at 2 rs, he is safe. No higher Stt for him

It's the option buyer who if his options is ITM, needs to make sure that he square off options so that option is not excersized

I sold 24200 put today , I didn't try to cover it at all because it was otm it was going to be zero, but a buyer at even 5 paise if spot had closed at 24200.05, it would have resulted for him as excersized option and he would have to pay high stt for it
@princy01 You are getting it completely wrong. Discussion with regard to option seller is not pertaining to STT but not sq off option in 5 paise per share and finally ended up paying Rs 11.35 per share. Bank Nifty Put 23900 was all seller in 5 paise and option writer should have covered position by paying 5 paise instead of allowing it to go in expiry and finally have to Pay Rs 11.35 ( 23900 - 22888.65 ).

As far as my option Trading is concerned , I was part of core team who worked very hard to bring derivatives in India , represented twice before J R Verma Committee under SEBI. I organised Seminar on Derivatives much before derivatives started in Indian exchanges. Let us keep discussion to its core how to avoid losses due to STT.
 

headstrong007

----- Full-Time ----- Day-Trader
#25
Princy don't waste your time here, we said what we have to say.

Some people never acknowledge their mistake even it's crystal clear in front of all(highlighted with red). They still, try to twist the arguments. I can only say such people are not successful traders, bcoz successful traders know how to admit their mistake quickly.

Successful traders must not argue with the people who are not traders...
 
#27
My point is simple
There was a time when in USA one paid 91% income tax............ You read it right, read that again
Also don't compare two countries its almost unfair to compare two things when everything about them is different in all aspects of life
It was you who brought in reference to other country in the first place! LoL! Convenient arguments! There is nothing wrong, and in fact better to compare with better countries, if you want to go forward.

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
/QUOTE]
While it is right to fight for STT removal, you still do not understand.
We are the largest democracy, and we cannot have such draconian tax. For maths, I have given an example of 263% tax on gross receipts, and I repeat, gross receipts, not the profits. It will go up even further with the closing price closer to the Strike price on ITM Options.
If you are taxed, let us say, 263% of your income, that means you need to pay all that you have received, and also pay over one and a half times more to the govt. Nobody would imagine this kind of taxation, and by normal practice one would imagine the taxes to be a small portion of only the income (Not receipts). This is not taxes, but robbery by asking for more than the reciepts. So ignorance does not allow them to be robbed by way of STT!
Do not justify saying that govt needs money to run! LOL!
 
#28
There is likely some ulterior motives behind this, which would get exposed soon. It is difficult to believe that all representations went down the drain, and the regulators SEBI, the stock exchanges NSE & BSE cannot understand this. And everyone responsible are keeping quiet!
 

princy01

Well-Known Member
#29
It was you who brought in reference to other country in the first place! LoL! Convenient arguments! There is nothing wrong, and in fact better to compare with better countries, if you want to go forward.
I hope you read your own post first, as you brought this "others country don't have such tax line"

You forget so easily :D


As for comparison, first those entity in comparison must be almost equal in each and every way before comparison is fair and square.

Now can we compare India and other countries, please tell us how? :D
 
#30
There are normal principles of justice. If you understand that, then they can be compared.

While it is right to fight for STT removal, you still do not understand.
We are the largest democracy, and we cannot have such draconian tax. For maths, I have given an example of 263% tax on gross receipts, and I repeat, gross receipts, not the profits. It will go up even further with the closing price closer to the Strike price on ITM Options.
If you are taxed, let us say, 263% of your income, that means you need to pay all that you have received, and also pay over one and a half times more to the govt. Nobody would imagine this kind of taxation, and by normal practice one would imagine the taxes to be a small portion of only the income (Not receipts). This is not taxes, but robbery by asking for more than the reciepts. So ignorance does not allow them to be robbed by way of STT!
Do not justify saying that govt needs money to run!
 

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