Comment on STT Trap - Options Expiry - NSE BSE MCX-SX
commented on
25 Jun 2014, 08:59 PM
Hi Nithin,
Wonderful effort and time on your part to educate the traders. I read the blog post, but i have to say i am confused. Permit me to summarize what i understood:
1. If an option that is in the money if left exercised would attract large STT. (0.125%)
2. If an option that is short and if bought back would attract 0.017% on the premium value only and is collected upfront.
Hence, it is always advisable to sell your In the Money options.
This is where, i am confused:
On the day of expiry, an option that is supposed have an value of say, 50 is going for 45. The reason stated is STT tax is being factored in and hence they are going for discount.
My question is :
a. The STT tax that is being factored in: Is it the same STT tax that would be levied if the option is left unexercised?
b. If the STT tax is being factored, then if we selling an in the money option on expiry day, isn’t it as good as letting the options expire?
Once again, you are really doing a great job of going the extra mile.