Comment on STT Trap - Options Expiry - NSE BSE MCX-SX
commented on
18 Jun 2013, 04:04 AM
Theoretically an option is exercised means, that the buyer of an option has exercised his right to take/give delivery of the underlying based on if it is calls or puts respectively.
In India all options are cash settled and there is no actual exchange of delivery that takes place once it is exercised, only the cash difference is settled. But since theoretically this accounts to an option buyer asking/giving delivery of the underlying the STT is now considered as per delivery based trade which is 0.125% of the entire value of the trade and not just the premium.
What is a mistake by the government though is that when they reduced the STT rates for delivery based trading from 0.125% to 0.1%, they I guess forgot to reduce the STT for option exercised rates from 0.125% to 0.1% because ideally going by the logic it should have gotten reduced also.
Hope this clarifies.