STT Trap – Options Expiry – NSE BSE MCX-SX
Update: 2019 Budget, no more STT trap. STT on exercised options to be on intrinsic value from Sep 1st 2019. Check this.
Update: With effect from 31st August 2017, the exchanges have put in place a mechanism to address this anomaly. More details on this change here.
Traders,
- Why do options trade at lesser than the theoretical value on the last day of expiry?
- Why is it important to square off ITM (in the money) options rather than let them expire on the expiry day?
Not knowing the answer to the above questions can cause a potential loss and hence the reason for writing this blog. I am assuming that all of you reading understand the basics of option trading.
Many of us would have had the following 2 questions or faced similar scenarios at some point of our trading career
- Nifty is trading at 5950 and today is the day of expiry. At around 2:00 PM, Nifty 5900 calls and 6000 puts are trading at around Rs 45. Ideally it should be at least 50, so why?
- I had bought Nifty 5800 calls and Nifty closed at 5803 on expiry day. I could have sold it on the exchange but thought otherwise and let it expire assuming I will get back at least Rs 225 (Rs 3 x 75)/lot. To my shock, the contract note sent to me by the broker in the evening showed a debit of Rs 200/lot and when I called the broker some lady on the support team told it was a penalty from the exchange or more STT or some similar reason, so why?
The seeming anomaly in the price or the extra debit in the above scenarios is because of how STT (Security Transaction Tax) is considered for options that are exercised. Options are considered exercised if you hold buy positions in options till the end of expiry (till after 3.30pm on last thursday of the month) and with them having some intrinsic value or being ITM (in the money).
STT on normal option trades done on the exchange is charged at 0.05% of the selling side of the premium value.
So, if you buy 1 lot of Nifty 5900 options at Rs 100 and sell it at Rs 100, you have to pay 0.05% of the premium value on the selling side. So while buying 50 x Rs 100 you don’t have to pay STT, but while selling you have to pay STT of Rs 3.75 [0.05% of Rs 7500 (75 x 100)]. Usually the STT component while trading options is almost insignificant, in this example it is only Rs 3.75.
STT on BUY option positions that get exercised is 0.125% of the entire CONTRACT VALUE.
So, if you had bought 1 lot of Nifty 5900 options at Rs 100 and didn’t sell it but let it expire on the last day of the contract, it is considered exercised. Again while buying there is no STT, but since it is exercised, on the selling side you would pay an STT of Rs 562.5* much higher than Rs 3.75 which you would have paid if sold on the exchange instead of exercising.
*Rs 375 = 0.125% of ( (5900+100) x 50). Rs 375 would mean more than 7 points of movement on Nifty options, that is how high the impact of STT could be. (assuming nifty lot size of 50)
Do remember that if you are short/written options (sold first), you have already paid STT and it doesn’t matter if you buy the options on the exchange or hold them till expiry to square off, there is no STT on the buying side.
Currency trading in India presently has no STT levied by the government and hence you don’t have to be worried about paying higher STT while trading currency options on the expiry day.
With this knowledge the above 2 scenarios will suddenly start making sense.
- It is the last day of expiry with Nifty at 5950 and if I buy 5900 calls or 6000 puts and I hold it till the end of the day I will have to pay STT of almost Rs 560 (0.125% of (5900+50)*75) which is almost 8 points of movement on Nifty options. So a 5900 call/ 6000 put which should be trading above 50 if nifty is at 5950 will have to factor in this 8 points as STT, hence the value of ITM options will seem lesser on the last day of expiry. So a Nifty 5900 call which should be at least 50 if Nifty is around 5950 will be at 45, because everyone trading is factoring in the fact that STT will be much higher if the option is held till the end of that day. Similarly with the puts as well.
- You had 5800 calls and Nifty futures closed on expiry at 5803. Yes, your contract note will show a credit from your option sale of Rs 225 (3×75) but since you let it expire in the money it is treated as an exercised option and hence your contract note will also have an STT debit of Rs 544 (0.125% of (5803*75)). So net, instead of receiving Rs 225, you will now end up having to pay Rs 319.
In gist, on expiry day,
- If you have bought options and they are expiring in the money, you would rather sell it on the exchange than let it expire/exercise and having to pay much higher STT.
- If the options are expiring worthless (with 0 value), you don’t have to sell it to save STT because STT on options which has no value is zero.
- If you see options which seem to be cheap (trading lesser than theoretical value), do consider the fact that it is so because of higher STT and will not magically correct before the end of the day.
Many traders every expiry fall into the STT trap by either not selling their ITM options and letting it expire (especially which are very close to strike price) or else taking trades/strategies assuming that discounted price of option will correct before the end of the expiry day.
Happy Trading,
Nithin Kamath
Founder & CEO @ Zerodha. Partnering startups through Rainmatter. Love playing poker, basketball, and guitar. @Nithin0dha on Twitter. | Personal website: https://nithinkamath.me
Hi Zerodha,
If I write ITM option @ 300 and at the expiry day it’s value stands @ 100 and I let the ITM option expire. How much STT will be charges. It will be higher STT as the option has got exercised by the person against my position or lower STT will be charged?
Kalyan,
As mentioned in the article, since you are writing options(i.e selling first), you would have already paid the applicable STT. In both the cases which is you buy on the exchange or if you let it expire, 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( @0.017% of the premium, which is negligible).
Cheers,
Hi Nithin,
If I had bought 1 lot Engineers India April CE 150 at 4.90 rs, but couldnot sell by expiry.
Last trading price is 16.85 on the expiry day.
What will happen to my Holding?
Will it be sold by the exchange at last trading price and return the amount to my account?
I think the stock closed at 167.2, you will get 17.2 as premium back. Yes, it will automatically get exercised and you will get this Rs 17.2 premium back. But you will have to pay that higher STT on it. You should check your contract notes to see all the charges.
Hello ,
I bot 4 lots of SOUTHBANK17OCT25PE NFO (quantity-132564) of options at 0.05 value .Right now no buyer to sell the quantity .what should i do .Do i get bank any amount in last date or i need to pay large STT. Please help me
Praveen, if the contract expires out of the money you don’t have to worry. If the contract trades in the money there will be liquidity usually and we will lapse all in the money options where STT is more than the intrinsic value of the options. Check this post for more.
thank u ,
Right now i paid 6628 for the option value 0.05 ,if option expires out of the money do i get that mount or i need to forgot that amount ?
Right now option value is 0.05 ,if out of money is option value become 0 ?
Hi nithin,
Can you please help me with my query.
I did chose to sell an option first and later buy it..
In case, I didn’t happen to buy it on/before the expiry date, how would the trade be settled..
Will it consider the ltp (last traded price) on that particular strike price?
To keep it simple, I sold put option of ITC at strike price of 300 for 33.45 premium.. if on the expiry, the price of ITC closes at 250 and there is no transactions done at that particular strike price, how would the settlement be?
Will it consider the ltp on the strike price I purchased?
Thanks
Varun
Settlement will be done based closing price of spot. Since ITC closed at 250, the intrinsic value of ITC 300PE is 50. You sold it at 33.45 and it will be bought back at 50. You make a loss of 16.25. Note that STT charges don’t apply on the buying side since you have already paid it while selling
What if I short sell ITC option (CE) @ 2 and on expiry day price come to 0.10 or 0.05 but there are no buyers?
so what happen in this case?
Or on expiry it become zero so how the settlement done?
I have the same query, if short a stock option and at the time of expiry it is OTM and due to some issue i am unable to square off the position then how is the settlement done?
What would happen to the profit that i have made during this trade and would there any penalties or changes for the user?
The OTP option would expire worthless and you will keep the premium you received.
Hi Sridhar,
Can you please tell how much STT was charged on that?
How much profit /loss on that option?
This will help in better understanding on option.
Thanks in advance.
Thanks so much, Nithin, for explaining this. I was also confused about STT implications on sold options. Now I know that I do not have to buy them back to square off the trade if I am getting to keep the premium.
Please clarify one more thing: What if I have to buy back the option to square off as the trade is going against me? What are the STT implications then?
Thanks so much for doing a wonderful job of clarifying things!
Keerti, You have already paid the STT while you’d sold the Option, so there isn’t any STT to be paid again while buying back an Option.
Dear Team, Ex I brought put option & on expiry date my put option is in profit but no buyer available/asking at low value for it, then what will happen to my option after expiry.
(Ex. Siemens SEP 1280 Put & Siemens closed on expiry day on 1220, I brought it at 20 Rs)
Please explain my profit, shall I sell or let it expire with extra STT charges
It will get settled at Rs 60. But yes, you will be forced to bear higher STT which is 0.125% of entire contract value.
Hi Nithin,
I have bought the call option of jubiliant foods 1100CE Nov’18 expiry. Depth in this particular option is very low so what would happen If I left the option untraded till the date of Expiry.
If the contract remains in the money till expiry, it will be cash settled by the exchange at the settlement price.
You Mean it will be settled at the rate Spot Price-Strike price?
SO IF WE BUY OPTION AND IT WILL EXPIRE OTM ,NO EXTRA CHARGES TO BR PAID?
Hey Pratik, if you let your OTM Option position expire, it will expire worthlessly and there will be no brokerage charges, also there are no additional charges for letting your OTM position expire.
Government should come down and look into this ASAP. STT is more than profits.
Until Government looks into this, Zerodha should help every one in implementing a code at 3:28 PM on expiry day every options should get squared Off automatically.
what if current goes at exactly 3:29 PM or what if system got struck at exactly 3:29 PM or what if no body is taking our calls at exactly 3:29 PM, with 3000 Lots i.e. 225000 Quantity every lives will come on roads.
Yes Zerodha,You should square off on our behalf. Its so demotivating that accidentally someone could not sqaure off for some reason so he will have to pay a higher STT. Please bring some new rule on you platform under options
You are right.it is effected our trading style.
Thanks for the blog …
I got one lot of nifty cal at 9200 in march last. This call was for may.
It costed me 13,000 in the last March. As of today it was going too low so my stop loss triggered. I got only 900 profit. I should have exit two days earlier which was 3000 rs profit. But when I exit today they deducting 13,000 whole money as premium for option. Is it correct ? Then why do they say for all trade it is make 20 or .05% if the lot valve whichever is lower will be charged. So max 20 rs. Only should be deducted. Why this premium for options Plz help me to retrieve this
Bala, STT is charged by the government and not the broker. Unfortunately, the way they charge STT for expired in the money option is not right. We are supporting this petition, so can you.
BALA TOOK 1 LOT (75) CALL 9200 THAT IS 9200 X 75 = 690000 , STT IS 690000 X 0.125% = 862.5 + OTHER CHARGES ,HOW HIS ALL 13000 IS deducted PLZ EXPLANE
donno… your calculation is correct. Bala should reach out to our customer support.
There are so many complains about customers’ money getting deducted out of proportion for no reason. I was thinking of opening a new account but am worried about my CAPITAL
Hi Punit, nothing like that happens. Usually people complaining about deductions is out of ignorance. This STT rule is set by the govt.
SIR what us Ur Brokage charges for f&o including taxes
Rs 20/executed order. You can check it out all here: https://zerodha.com/brokerage-calculator
Hello Kalyan Sir,
Recently I made a trail intraday trade; first time i bought 5 shares of wipro at 259.30 and immediately sold for the same 259.30 and again second time same 5 wipro shares at 259.00 and sold for 259.30. So my total sell is 2593.00 and profit 1.50. As as per our website, STT is calculated only on sell side for intraday, as per my knowledge it should be only .648 paise but i am charges Re 1.00, can you explain where i make mistake in calculation.
Thank you.
I am a newbie, so if any mistake pls correct.
Hi kamat,
In above senario, the option buyer will lose if option writer let it expire. Because it is in ITM and option buyer must have to sell after bought otherwise penalty. Dont think is this not fraud. May be i am wrong. But wants to get clarify
Hey Siva, there is no penalty for letting your long option position expire ITM. If you’re holding a Index Option, this will be settled by the exchange at the intrinsic value. While if it’s a Stock Option, depending on the option type (Call or Put) you will have to give or take delivery of underlying shares.
Since September 1st, 2019, there is no more STT trap. As now the STT is applicable on intrinsic value, instead of the contract value. You can check out this post for more details.
Thanks for this article, Nithin. Very helpful.
Hi Zerodha,
Why is STT so much higher for exercised options? Is it a mistake of the government or exchange?
The STT is something levied by Government. The Government should do a lot more explaining here!
On the other hand, this has nothing to do with the Exchange. Exchange merely implements Government Orders within the legal framework it is supposed to adhere to.
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.
If a thing which cannot be delivered, how it amounts to the transaction of that thing and the government is charging the tax on the amount of undeliverable thing. Thia did not happen in the kingdom of Aurangazeb in 17th century.
Because F&O is considered as a product which is eventually delivered (even though it doesn’t), we can show all F&O as a non-speculative business thankfully. If not it would also be treated as speculative income, and you couldn’t set off these losses/gains with other income. So the saving grace is because of this, taxation is lot more easier for F&O trading.
Nitin,
Thanks a lot for explaining, can you please let us know. What will happen in case of out of the money call option in not exercised. only the premium is gone or exchange will ask for some taxes also.
Will be highly thankful for your help.
Regards
Amit
Amit, The OTM options expire worthless. We don’t charge any brokerage for contracts expiring worthless.
More than a mistake, it seems ,the rules are bent in favour of the option writer.
After all its the deep pockets that are writers in most cases.
It is because of the skewed definition of ‘settlement price’.
STT is levied on the settlement price.
Settlement price of an option is defined as the closing price of the underlying, which defies all logic.
Dear Zerodha,
What if Bought CE or PE becomes 0.05 on Expiry and not 0.
What will be STT ? if I Do not Sq. Off or Sell ?
It is not about what price the CE/PE closed at , it is about what price the stock/underlying closed at.
If you had bought nifty 5700 calls and nifty closed at 5700.05, you will pay STT because the option has expired in the money.
hello sir, as said by you STT depends on underlying/spot price rather than the price of premium. if anyone brought 8700 PE and premium came to 0.05 and spot price is 8939. so is the position would be OUT OF THE MONEY OPTION ?
does premium 0.05 here can be considered 0 ?
No it won’t be. Only if Nifty closes below 8700 will it expire in the money.
Dear Nitin,
I’ve went through Zerodha blogs and happy to say that I’ve learned a lot of options trading, with one confusion. Say I’ve 1 Lot [75] at 8500 and now the strike is at 9000. No one is there to buy my calls as premium is at 738. What happens at expiry. I understood about STT I need to pay, but what will be my profit or loss? As there is no one to buy, do I end in loss?
Arun all in the money options get exercised. If you have 8500 calls and nifty closes expiry at 9000, you will get back 500 (9000-8500).
Thank you Sir for your response. Is this 75 x 500 or simply 1 x 500.
75 x 500, each lot is 75 Nifty
Thanks again. This will complete my understanding on Options trading. I really appreciate your response for each question of the customer. Thanks Zerodha again and just fyi, I recovered my losses after becoming Zerodha customer which enabled me to do more trades.
Hi, In this contact what about STT? he has to pay STT too right? the profit is 500 – STT (which is 9000*75*0.125%+ other chargers say approx. 500*75-790 = 36719.
Pl. clarify.
regards.
shivakumar
kindly explain this one sir, how much SST will have to pay in this case.
In Dinesh’s example, 8700PE will be OTM position. I too would like to understand STT implication, if any, in such cases. Thanks for the article.
I am a house wife and I am doing option trading from last six months.i have a loss of more than 1lakh.Can u tell me how can i take my profit and loss statement.is this statement shuld be audited by C.A.
PNL statement is available on our backoffice. If you don’t know how to access it, give us a call on 080-40402020 or send an email to [email protected]. Yes,ideally you will need to have this audited by a CA .
Hi,
Quick question: Is STT applicable when I buy back my previously sold call or put option and let it expire In-the-money ?
In other words, What is applicable STT Rate for following set of transactions:
1. Sell Put or call option at SP: X for premium P. applicable STT is
0.017 % on premium amount.
2. Buy that same option (i.e. put or call) at same SP: X for premium Q.
At the time of expiry, options are In-the-money…
Is STT applicable at the rate of 0.125 % on settlement price of underlying index or stock?
if No, then does applicability of STT change with strikeprice? meaning sell for SP X and buy for SP Y (different than X).
If Yes, then whoever buys that in-the-money option LAST have to pay STT. Meaning government is sure of STT income for all the in-the-money option contracts, right?
please advise.
thanks
ez.
If you have sold the options, you have already paid the STT so you don’t have to worry about paying STT while buying your options back either on the exchange or when it expires in the money.
Whoever holds a buy option position which is expiring in the money has to pay the increased STT on expiry if he doesn’t sell it on the exchange.
You seem a little confused, do read the blog again.
sir,connected to the previous question, when I sell a option, say at 50 RS and if the option price goes down to 10 Rs at expiry or shoots up to 150 Rs),and no buyers,and it is allowed to expire.As you said no need for stt since already while selling I have paid.But I am wondering ,after expiry what will happen to the option which I sold with no buyers.Who will buy the option after expiry.Ultimately what happens to the unbought deep in the money options.
If it is a stock option that’s expiring ITM, it’ll result in physical delivery and you’ll have to pay the full contract value and receive shares in your demat account. If it is an index option, you lost Rs. 100 and the option is considered exercised.
Thank you Zerodha.
yes, indeed. I am little confused. if I understood correctly:
1. when Mr. A sells options to Mr. B then at the time of sale, Mr. A pays STT @ 0.017% on the premium.
2. At the time of expiry, Mr. B will try his best to sell this option if that option is In-the-money. Now, if Mr. B can sell that option then Mr. B needs to pay STT @ 0.017% on the premium.
3. Now, there are two possibilities. One that Mr. B sold back that option to Mr. A and Mr. A held it till expiry and option was In-the-money. Mr. A did NOT pay any STT for that particular option contract even if it expired in the money, right?
Second possibility is that Mr. B sold that option to Mr. C (anyone other than Mr. A) and if Mr. C held it till expiry and option was in the money, then Mr.C paid much higher STT @ 0.125% on settlement price, right?
So please confirm that answer to my real/original question:
Is STT applicable when I buy back my previously sold call or put option and let it expire In-the-money ?
is
STT is NOT applicable when you buy back your previously sold options and let it expire in-the-money.
Now, second doubt: If I sell option for SP X and buy same type of option (i.e. call or put) for SP Y ( X and Y are different), and if I keep both the options till expiry and both are in the money, I guess, since SP is different, I will have to pay much higher STT on the bought option, right?
Thanks in advance.
ez.
Hi,
further to my reply earlier,
Options writers are at advantage when buying back their in-the-money options at the time of expiry since they need not pay any STT, right?
thanks
ez.
Yes, EZ you are right,
When you short options you are already paying STT and hence don’t have to pay STT when either you buy back or let it expire.
When you buy options, you haven’t paid STT, so if you sell it in the market you will pay STT at 0.017% of premium and if you don’t sell it and let it expire, if the options have any value, you will have to pay higher STT..
so yes option writers are in an advantage..
sir, how to trade in future and option ..i m a new trader.. plz guide me.
Suggest you go through the basics of F&O trading here: http://zerodha.com/varsity/module/futures-trading/
if i write an option and it expires out-the-money or in-the-money will i have any additional stt to pay?
what are all the charges levied on allowing a option i have written to expire?
Additional STT is charged when you are the buyer of an in-the-money option and have not squared it off before market closing..In such a case the option gets exercised and you get charged STT at a higher rate.
Note that STT is charged for F&O only on the selling side..
In case you are writing/selling an option you would receive credit of the premium and if the options you have written expire worthless you get to keep the premium credit..No excess STT gets charged..
Additional STT = (0.125% of the contract value*)
Contract Value (Call Option) = (Strike Price+Option Premium)*Lot Size
Contract Value (Put Option) = (Strike Price-Option Premium)*Lot Size
Zerodha – needs to these basic things first:
1) Introduce good till Cancel orders.
2) Introduce Trailing stop loss orders. Trailing by some perecent, price difference etc .
3) Charting software for stocks and indices having long term(20 – 30 year atleast) logarithmic charts facility also.
4) Profit loss statement – where once can see daily P/L, Weekly P/L , monthly P/L, Year to date P/L, Yearly P/L.
Zerodha has lowered brokerage costs which is appreciable – but lacking on many other aspects still.
Working on it
Thanks
It is very useful information and the followup questions and answers clarified my doubts.
Thanks Zerodha!
I tried to search the blog for my doubt and came to read this post which was very informative. However, my doubt remained unanswered. If I purchased nifty option 45rs and on the date of expiry it is 70rs, what will be the impact in my account if i do not sell the contract? Will i get the differential amount of Rs 25 minus the STT and brokerage?
Hi Lakshmi,
When you bought the nifty option at Rs 45( Rs 45x 50 = Rs 2200) is debited from your trading account. Assuming on the last day this value is Rs 70 and if you don’t sell it, you will have to pay a higher STT because you exercise the option and not sell it on the exchange. So at the end of the last day you get back Rs 3500( 70×50) minus brokerage + higher STT( around Rs 250) +other charges.
Hope this clarifies.
Cheers,
Thank you very much nithin. And I salute to your patience as you read many time same questions and you always give the answer according to the people. Thanks again
Dear Nitin,
Very useful information. Actually I was looking for this and now only I got very detailed information on this.
Thanks.
Faisal
Dear Team
I need to ask a very basic question
I had sold bank nifty 8700 put @ Rs 60
on expiry date at 3:25PM bank nifty is trading at 8900 ( so most possible put option will closed out of money).
Do I need to sqare off my position by buying option or leave it?
rgds
Gyan
If you have sold options, you would have already paid STT and don’t have to worry about paying a higher STT and it doesn’t matter if the option is in the money or not, you can let it expire.
But if you have bought options and it is expiring in the money, then it makes sense to sell it in the market rather than holding it, because then you pay higher STT.
Cheers,
hi
i would like to learn trading in options, is there any websites for that
kinldy advice.
Sreejith
Sreejith,
Nothing that we can vouch for, but I guess best way to learn is to put a very small capital in your trading account and give it a shot, you will learn in the process.
SIR,Suppose i bought a call option and its price becomes 0 then will they be squared off automatically or will i still have those options and sell when the price increases..?
On the expiry day if it is 0 at closing, that would mean the option is worthless. All such worthless options are squared off automatically.
Hi, just wondering, what is the time taken for settlement of OTM options that expire worthless, are they settled same day by NSE ? Are there any extra charges incurred by us if we leave the shorted options to expire worthless ?
Also, on expiry day,i see lakhs of orders to buy significantly OTM options at 0.05 or 0.10 Rupee, can you throw some light on as to who is buying those options, what is the reason for it ?
Thanks,
Shrikant
Shrikant,
If you are a person who has shorted and letting the options expire worthless, nothing extra you have to pay. It is settled on T+1 i.2 the next day you will have funds in your account.
The large amount of buy orders that you see are basically of people who are covering the options they have shorted. They would be covering their positions to free the margin blocked so that they can probably use that margin to rollover the position or use it for another trade.
Brilliant Question. Exactly the same as I was looking for.
Thanks for enlightening us on applicability of STT for option trade during expiry. Thank you for reducing turnover charges for F&O segment.
My query is
In covered call how margin money is calculated. Example: I sold one lot of nifty 5900 call at Rs 200/-. I purchased one lot of nifty 6000 at Rs 150/-. Both the transactions are for same month expiry. Hence no loss occur for any upward movement beyond nifty 6000 points. Maximum loss possible in the above transaction is only Rs 100*50 = 5000/- plus option premium loss/gain. How the margins will be calculated for these transactions.
with regards,
M.Sridaran
Sridaran,
We have a tool called SPAN calculator which helps you in calculating this. Read this blog on how to use.
Margins will be reduced most likely by around 30%.
Sir,
I have a basic question. If I buy 1 lot of nifty and if I dont square off before expiry, How it will be settled. will it be settled at the spot rate of nifty or at the last traded price of the nifty. whether stt and other charges will apply
Similarly If I sell one lot of Nifty and if I dont square off before expiry. How it will be settled. will it be settled at the spot rate of nifty or at the last traded price of the nifty. whether stt and other charges will apply
Thanks And Regards,
Sharada.
Sharada,
What you haven’t mentioned is if it is 1 lot of nifty futures or options.
But all nifty futures and options on the expiry day get adjusted to the closing price of the Nifty Index.
If you buy/sell Nifty futures and hold it to expiry, the STT doesn’t increase, it remains the same.
If you sell Nifty options and hold it till expiry, STT doesn’t change.
If you buy Nifty options and hold if till expiry, the price of option firstly gets adjusted to closing Nifty index price on the expiry day. If the buy options has any value to it, STT will go up as mentioned in the blog above, if the buy options has no value it gets expired worthless and no STT is applicable.
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Sir,
I have a doubt in options.
Say for example i am buying nifty call options 6200 and its premium is 50 and nifty is currntly trading at 6100 at my time of buying and at expiry day if nifty closes out of the money 6160 but my premium goes to 60 can i exercise this option ?since it is out of money and not in the money and will it be a profit if i sold out of money
Muthu,
On expiry day if Nifty is at 6160, the 6200 calls will no way be at Rs 60, the price would have automatically dropped from the Rs 50 you have purchased at. If Nifty closes at 6160 on expiry, the 6200 calls will be of zero value.
Hi,
If I buy 6200 PE Nov series at 50 and nifty expires at 6000 with my PE at 200, then what will happen if I keep holding it and market closes at 3:30pm. Considering 1 Lot only, what will happen ? Plz clarify.
If you keep holding the 6200 PE and don’t square off, after the market closing on expiry your option is exercised. Since it is exercised, it is considered as a delivery trade and STT is charged on the entire contract value ( 0.01% of around 3lks = Rs 300). If you had sold it in the market at 200 you would have paid an STT only on premium ( 0.017% of Rs 10,000 = Rs 1.7).
So you end up paying a lot more STT.
So my profit without STT would be 200-50 = 150/- per lot which is 7500.
I have 2 questions :
1. Assuming my trading account now before 3:30 is 0/-. Then after 3:30 what will it show ?
2. After expiry is over and I also didnt exit my in-the-money option, then is there anything other than STT to be worry about ?
You got it wrong. If you had sold the 6200 PE at Rs 200 in the market you would have got Rs 10,000 and would have had only Rs 1.7 as STT. But if you didn’t sell it on the exchange and held it till expiry, you would get back Rs 9700 as you would have to pay STT of Rs 300. So additional cost of Rs 300 for not selling it in the exchange. ..
1. After 3.30 once the daily setltement process is done, it would show 9700 if you held it to expiry and 10,000 if you sold it in the market.
2. There is nothing other than extra STT to worry about.
Dear Nitin,
I need some calrification regrading associted charges with option exercise.
Suppose i buy a 2700 CE 1 lot with premium of Rs 4060 (Nifty is around 6700).
Assuming i pay brokerage @ Rs 15 per lot, My net outflow for the transaction will be: 4060+ ((15/50)+0.052%*4060)*1.12 = 4062.70054
(0.052% of premium is for transaction charges, stamp duty, sebi tax. Correct me if wrong)
Now if i hold the contract till the last day and let it be exercised considering it to be ITM. What will be my net inflow on that day? (Assume nifty to be 6700 on that day). Please show the detail calculation for brokerage charges, transaction charges, stamp duty, etc.
My net profit/ loss will be? : inflow on exercise – outflow on buying the option = ?
Bhawani,
If your long option is exercised, everything else remains the same, only STT would be 0.125% of the contract volume, which if Nifty closes at 6700 would be 6700*50*0.125%= Rs 418
Cheers
Dear Nitin,
Need to understand impact of below trade on expire day.
Nifty expires on 6106
I bought 6100 CE 20000 qty @ 0.05 and did not sell it.
what will be STT ? is it 6106*20000*0.125/100 ?
Yep, correct!
You mean sell value would be 20000*6 = 120000
and STT = 6106*20000*0.125/100 =152650
So Loss of -32650
Yep, correct and hence we keep sending out messages on the screen asking to square off all ITM options in the market itself.
Thanks Nitin… This really an eye-opening post….
Keep educating peoples….
Hi Nithin,
Thanks for the replying all the queries.
I got all the scenarios you mentioned.
I have only only one doubt for the below scenario:
NIFTY expires at 6002
Say I bought one call 6000 strike price.
The value of call (or payoff) will be 2 * 50 = 100 at expiry.
But I didnt square off my position and let it expire so I have to pay excess STT of around 350(approx amount) as call is ITM.
So what will happen?
Result 1: Only 100 will get deducted instead of 350 as payoff of call is 100
Result 2: 100-350 = 250 will get deducted from my trading account. Will they deduct excess 250 from my trading account?
Please Nithin comment what will happen Result 1 or Result 2 or any other.
Anticipating your reply
Regards,
Mittal
Mittal,
Result 2 is what will happen, excess STT will be deducted from your trading account.
Thanks Nithin!!
I have 1 doubt, please clarify
On November 28, 2013 expiry day, Bank Nifty 10900 is showing out of the money, but it is closed at Rs. 15.90. My doubt is, If I have purchased 1000 bank nifty options at Rupee 1.00 and not sold it. Will it be square off to RS.15.90 with additional STT or Since it is out of the money it is going to be ended at 5 paise . Please Advice on this.
Thank You in advance.
That is Bank Nifty 10900 Put
If you see the settlement price of Bank nifty NOV it is 10906 (see the future closing). Since the closing is higher than 10900 all 10900 puts are Out of money even though the last traded price might be 15.9. Since it is OTM it expires worthless (zero and not 0.05).
Hope this clarifies
Hi Nithin,
Thanks for this post. Really usefull for. It cleared many doubts about the options trading.
But i still have some confusion , if the bank nifty closed at 10000 then all the call options less then
10000 get benefited or is there a limit ( like above 5000 call options only gets benefited ).
The reason for the question is, i always seen the 6000 , 7000 call options price as 0.
Thanks,
Santhosh
Santhosh,
Didn’t get what you mean by benefited?
If Bank nifty closes at 10000, all calls below 10,000 expire in the money which means they have some value. A 9000 call has a value of 1000, a 8000 call has a value of 2000 and so on. If you let these options with value expire, you pay extra STT.
Why does 6000 calls and 7000 calls show 0 is because there is no trading interest in such deep in the money options, and hence there will be no trades taking place.
Hope this helps,
Dear Sir,
Does the STT rule apply to futures as well?
If yes what are the percentages?
Thanks in anticipation.
Regards
Karan
Karan,
It applies only for options and only for options expiring in the money.
Cheers,
Thanks a lot sir……
hai to traders in midcap, Bengaluru based Khoday India is trading around Rs.65, soon will come for Reverse Book Building, at that time it will quote around Rs.450- 500(since it worth about Rs.7500 Crore propery in Kanakapura road, Bengaluru) buy it and enjoy it
If you see options which seem to be cheap (trading lesser than theoretical value), do consider the fact that it is so because of higher STT and will not magically correct before the end of the day.
GIVE ME AN EXAMPLE FOR THIS ?
You would typically see this scenario on the expiry day, and closer to 3.30. So if Nifty is at 6050, Nifty 6000 calls and Nifty 6000 puts ideally should have minimum value of Rs 50 each, but you might see both trading at 46.
I have seen many traders think of this as an opportunity, but it is not so.
The reason for them trading at 46 would be because of the cost of STT, if the position is held post 3.30. So even though it might be at 46, the cost of STT would be around Rs 300 or 6 points, and hence the actual value of the option being 50+.
Somebody fooled me to by south bank put option on expiry for .05p and same is not sold because no buyers and closed with 0.05 p only. I have invested huge amount on that. Can any one help me out how to understand this? Anything I can get back on my investment?
It depends on what strike put option you bought, and what price the stock closed at. If the stock closed above the strike price, it would have expired worthless.
if i sell nifty option 6200 call at 110 and nifty is at 6175 spot,
i keep it as it is till expiry and nifty spot is at level at 6225. then what happen what is my profit and loss.
Rajesh,
On expiry if nifty is at 6225 and you are holding 6200 calls, that means that your option is in the money by Rs 25. If you hold it after 3.30, you will get back Rs 25 – around Rs 6 as STT(extra STT for holding an exercised option), so you get back around Rs 19.
Cheers,
Thank you Nitin for reply, but i have still little confusion… I sell nifty option and at expiry it will become zero as i heard, and on selling i revived 110 while selling.when i sell nifty market is low and at expiry.
You say i receive rs.19/- kindly explain. and also guide me is this advisable to sell nifty option and keep it as it is till expiry??
Rajesh, My bad 🙂 , didn’t see your question correctly, I thought you mentioned option buy..
If you sell option, when you sell Rs 110 is credited to you for the option shorted. If Nifty expires at 6225, Rs 25 is taken back from the Rs 110, so you making a net profit of Rs 85.
There is no worry of paying extra STT for a short option position, because even if the option expires in the money, you don’t have to pay any additional STT.
Is it a good idea to short options?
The odds of winning go up significantly when you short options, compared to buying options. But what has to be remembered with shorting options is that the profits are limited, whereas the risk is unlimited.
Hopefully this helps,
cheers,
Thank you Nitin
Hi Nithin,
Lets say i have bought “Bank Nifty” for 20 rs for the strike price 12000 in MIS order. In the days end bank nifty is closed at 12050. But the last traded price for bank nifty is 40 rs. So what is my profit ? is it 30 rs( 50 – 20) or
20 rs (40 -20)
Thanks,
Santhosh
If you have bought it as MIS, this will get squared off at 3.20pm, whatever price above 20 it is sold at is your profit. Assuming if you had bought this as NRML, and held the option buy position overnight, your profit will be the price above Rs 20 that you sell tomorrow.
Cheers,
If no buyers are there then what price will it be sold ?
Thanks,
Santhosh
If there are no buyers, all options today in India are European. What this means is that you will be forced to wait till a buyer comes buy or hold this till expiry day. On expiry day, if bank nifty is above 12000, you get how much ever above 12000 credited to you, and if below you loose the entire premium.
Hi Nithin,
I am new to this site and found the informations very useful. please explain some of my Queries.
consider the case of Yes bank, CMP Rs. 365/- at NSE on 13.12.2013
I decide to buy 1 lot PUT (lot size 500 nos.) YESBANK 26Dec2013 PE 360.00 on 16.12.13 @ Rs. 0.90/-
(i) on 20 th December, Yes bank is trading at 355. can I sell my 1 lot PUT on this day (which is before expiry day) ? will I be able to book profit ?
(ii) If Yes Bank trades at 375 on 20 th Dec. and I still decide to sell my 1 lot PUT, then what will happen ?
i. yes you can sell your put anytime you want after buying, even after 1 second, or you can wait till end of dec expiry. If you bought at 0.9, whatever price you sell above 0.9 is your profit.
ii. If Yes bank goes up, your put value will drop from 0.9, your loss will be whatever price below 0.9, you sell the put option in the market.
Guess, you need help on basics of options, we are planning to put up some posts on this.
Cheers,
thank you very much nithin.
hi, iam very new to trading and i tried options sector,
may be on 18thdec13 i buyed 1 lot nifty options @ strike price 6450 @2.35 Rs(50*2.35)
now its last day i tried to squared off ,,,,LTP is 0.05 but its vein… so my question is
how much i will be in loss? and what is stt charges to me now?
if u answer me it will appreciate….
thanks
When you buy an option the maximum loss you can make is the Option Premium that you’ve paid..On the day of expiry, if the option that you have purchased is Out of the money then they expire worthless.. Higher STT will be applicable only in case you do not square off an “In the money” option..It is explained in detail here: http://zerodha.com/z-connect/queries/stock-and-fo-queries/stt-options-nse-bse-mcx-sx
@sri Your option expired out-of-money so nothing would be charged.
@anjum thanks for ur reply n i thought i may loss around 200rs(premium+brokarage+etc) and also for excess stt around 400rs that is too much for me….i just want to know how options for so at low premium i tooked…anyway thanks
hi, i think there are 3 types of money in options?
1.at the money
2.in the money
3.out of the money
can anybody explain this with example?
thanks
Great article Nithin. Thx
If I first sell a lot of Nifty Options and then buy it back the same day then still the STT be 0.125% or 0.017% as I have settled it on the same day?
STT will be 0.125% of the contract only if you buy and keep holding it to the close of markets on the expiry day, otherwise it will always be 0.0017%. Yes in your example also you will pay only 0.017%.
Mujhe koi btaye ki agar me koi share 2.40 me 10000kharidu or 2.45 me bech du to mujhe kya fayda hoga
Around Rs 1000, you can calculate this yourself using our brokerage calculator.
Sir ye inter cost kya hoti he ..ye kb or kese. Lgti he
The Inter cost voucher is an internal posting we do on the books of accounts. It does not effect your ledger in any way.
To explain, assuming you have a balance of Rs.170 in your trading account of which Rs.90 is in your NSE EQ segment and the remaining Rs.80 is in your NSE F&O segment. In case you place a withdrawal for Rs.150, you will receive Rs.90 from NSE EQ and Rs.60 from NSE F&O ledger and we will post an inter cost voucher to transfer Rs.60 from your NSE F&O ledger to your NSE EQ ledger because we process all payouts from NSE EQ ledger.
Hi am Arun, sir i have bough an call option of strike price Rs. 160/- @Rs. 0.15/- of 4000 shares and it squireup at Rs. 160.15 what will be net effect
Arun, if you sell the options on the exchange STT will be 0.017% of the premium turnover, so 0.017% of 4000 x 0.15 which is around Rs 1.
If you don’t sell the options, and let it expire, STT will be 0.125% of the contract turnover, so 0.125% of 4000 x 160.15 which is Rs 800.
So it is always best to sell it on the exchange rather than letting expire, if you are holding in the money options.
Hello Nithin,
First of all i should thank you a tonne for this more than useful piece of article. I just lost 40000 yesterday on account of this STT and got the bill for the same. Was searching for reasons for the same as my broker was not available today and that’s how i landed on this page. I bought BankNifty 12600 strike Call 100 lots (2500 quantity) @ Rs 3.70 and left it unsold. After closing hours, It got sold @ 4.95 but the STT charged was Rs 39395. I just incurred such a huge loss because of lack of knowledge on STT Charge on Expiry day for an unsold Call option.
I hope this article of yours reaches to many traders like me before they lose their money to the Govt.
I just have one query…is there any chance i can recover this STT amount of appx Rs 40000? Kindly guide, if there’s any.
Thanks a lot once again.
Vikas, there is no real way to recover this amount. Sorry about this,
I guess have to take this as a learning and move forward.
Thank you for the reply. But dont i need to pay brokerage and other charges. If yes then how will you calculate that? Do i need to pay additional brokerage charges for selling the underlying after exercise? I would appreciate if you can show the calculation.
Brokerage and other charges remain the same, so for example at Zerodha we charge Rs 20 per irrespective of your size, so if you exercise the brokerage will remain the same, similarly all the other charges that you pay, except for STT which will be how much I mentioned.
hi nitin I am almost convinced with all the clarifications above….
can you just tell me
if I bought 6500 CE @ Rs. 55
and nifty spot closed at 6775 on last day and I don’t close my CE option position!
what is the amount that would be credited to my account?
🙂 , 6775 is 275 points in the money, so you will get credit of 13750 – around Rs 400 in STT, so around 13350
Natesh,
Hi Nithin, thanks to your patience of answering each and every query. I’ve a basic question on call option expiry in the money. have bought 24000 qty HDIL call option for 2.35 of 80 strike price for may’14 series. what if HDIL reaches 120 rs by the end of expiry at 3.30pm and i don’t sell my 3 lots of options.
Will i get the difference amount to my account minus all deductions (brokerage + STT :0.125% of contract value + other taxes)?
Should i have enough margin to buy 24k qty shares at Rs 80 or it’s not necessary to have margin to get the above settlement?
my assumption is there will be not enough bidder of Rs 80 call option close to expiry when HDIL reaches around 120 market price so either i’ve to leave my 3 lots it till the end or i can sell it for a lesser price may be around 20-30 in the exchange. Kindly suggest so that i can take proper decision knowing the expiry scenario.
Natesh, yeah stock options get illiquid when market moves away from the strike price. All options in India are cash settled with respect to the underlying, what I mean to say is that, if on the expiry day HDIL closes at 120, 80 calls will settle at Rs 40 and you will get back minus all deductions. There is no need of any margin, you have already bought the option, so you don’t need any money to sell it, margin is required only if you are taking a fresh sell in options.
Sir same question if that day on expiry I dont have any balance but contracts already in holding position, 3rd line from bottom not clear and please tell how much is profit
24000 x (120-80)-2.35 + charges
Hi
Nice article, cleared many of my doubts regarding options. I have a query left. What if I sell options near expiry which are relatively out of money and let them expire? what are the probable outcomes regarding the costs and profit in the following scenario?
I have sold a NIFTY 7500 call option and at the time of expiry NIFTY trades at
Scenario 1. 7300
Scenario 2. 7500
Scenario 3. 7600
If you have shorted options, you don’t have to worry about paying higher STT if you have to buy back or options expire at 0, as you would have already paid STT when you first short it. in
1. Expires worthless, so you get to keep the entire premium that you received when you shorted. No additional costs or brokerage.
2. Same as above.
3. Options will expire at Rs 100, this has to be paid back to the option buyer (Rs 5000 per lot). You will have to pay the normal brokerage and exchange charges, but no additional STT charges as such.
Hi Nithin,
Pls clear this doubt.
i shorted (written) 570 pe , at that time of shorting BPCL it was trading at 571.
On the day of expiry the BPCL ended at 536.1.
In order to close the contract i had to buy. But there are no sellers. So i was not able to buy.
I checked with customer support, they asked me to put an buy order and the exchange will buy it at premium.
So what will happen. Maximum at what rate it will get covered?
Such issues do happen with stock options, so basically all such ITM options are cash settled after expiry. what this means is that
Since you shorted 570 puts and market closed at 536.1, a premium of 500 x 33.9 (570-536.1) will be debited from your account today and given to the buyer of that option. When you had shorted you would have received an x amount of premium, the difference between that and 23.9 will be your loss on this trade.
It will be covered at exactly 33.9 if closing price of BPCL was 536.1.
Cheers,
Thank u Nithin for ur Speedy answer.
As 570-536.1=33.9.
I shorted it at 16.8 (amount of premium.)
So, 33.9-16.8= 17.1. Lot size 5oo. So, exactly, 8550 loss.
Am i right?
perfect
I had been in Share trading for the past 6 years.
After making lots of mistake, i was able to learn practically.
But Still need to learn more and much more.
After opening account with Zerodha, its not jus simply trading for me, its LEARNING.
Thank u for the team Zerodha.
Hi Nithin…the Q&A is Amazing…
Please address my doubt…
Market Today ended at Nifty – 7650
If i buy a Deep ITM (and Long Expiry) Call / Put option.
For eg.Today i buy – Nifty Call Option (Aug 2014 Contract) of Strike 7300 for Rs. 520/-…
Case 1 – If Nifty on Option Expiry (28th Aug 2014) touches 8000
then in this case my already Deep ITM Call option gets deeper…so will there be an increased risk of illiquidity…so i wont be able to sell in the market, BUT can i wait for the day end, so that the option is excercised and i get intrinsic value??
Also, please explain the process of Excercising the option on expiry….is the pay out calculated based on intrinsic value?
or there is some other calculation methodology??
Case 1: Yes you can just wait it out to expire if liquidity dries up. All expired in the money options automatically are exercised and you don’t have to do anything for this.
Calculation is based on intrinsic value, in your case Rs 700 x 50 = You get back Rs 35000, but as I have explained in the blog above you will end up losing around Rs 400( 0.1% x 8000 x 50) or around 8 points per lot as STT if your ITM options get exercised.
Thank you Nithin..!
I tried to Buy Nifty Call Option (Aug 2014 Contract) of Strike 7300 for Rs 520/- but the broker told me that i couldnt trade in those options….because the liquidity is low….is there any other way by which i can buy options of August?? because the price seems pretty attractive??
Im even Planning a Net straddle trade….i.e
1) Buy July Call Strike 7650 @ Rs. 226/-
2) Buy July Put Strike 7650 @ Rs. 258/-
3) Sell June Call Strike 7650 @ Rs. 95/-
4) Sell June Putl Strike 7650 @ Rs. 73/-
the Total Cost of this straddle is Rs.316/- i.e (226 + 258) – (95 + 73)…
Would there be a reduction of margin to be posted?? as this is a hedging strategy??
if yes…how is the reduced margin calculated??
Thanks
Yash!
Yash, guess that you are not trading with us (Zerodha), we allow you to trade on all contracts. Use our SPAN calculator to check for how much your margin reduces by. But this margin may not be same across all brokers.
Cheers,
Thank you nitin…im surely opening an account with Zerodha…!
1 Last question….Today i tried selling (Shorting) a Deep ITM (Distant) Option…(as a part of my hedging strategy).i.e i tried writing a Nifty Call Option of July of Strike 7300 @ Rs. 405/-…..my current broker did not execute the trade…saying the trade was rejected by RMS (Risk Management)….while i agree this option was not very liquid….but i asked him to execute at the bid price…
Why does this order rejection occur???….does Zerodha have the same RMS policy…or can i with Zerodha execute trades for illiquid securities???
Thanks Again!
Yash
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.
a. No it won’t always be the exact difference, but typically you will see options trading at a discount to its intrinsic value before market closing on expiry.
b. Yep if the difference is exact, you could just let the options expire 🙂 ,but the problem usually happens when Nifty closes at say 7501 and you are holding 7500 calls. If you sell on the exchange, you will get atleast 0.5 to Rs 1, but if you don’t you can loose Rs 6 or Rs 300 per lot. Hence it is advisable to usually sell all long options on the market.
Thanks a lot Nithin.
Great going with Zerodha. You are good inspiration to entrepreneurs.
Dear Nithin
I have traded 7500 PE on 26/06/2014 several times
in last traded 2050 Quantity of 7500 PE i.e. 41 Lots get stuck and no sell order accepted by
Exchange as my Broker( Zerodha) told me, even the Script was trading at that time trading
finally it got settled in settlement.
LATER EXCHANGE CHARGED ME a huge amount of Rs. Approx 19219 as STT. without my fault, as
Exchange system not accepted the order it is not a fault of Customer
Please do the needful in this regard
Best Regards
these are European options there is no movement of underlying security, there is just a cash settlement then why such a huge charge, NSE should not charge this much amount as STT for IN THE PENNIES (ITP) option. this should be like –> actual STT or Profit whichever is lower. this will do the justice to traders. Zerodha can we propose this to NSE/SEBI?
Yep we have already approached, the logic here being that an exercised option is considered as a delivery trade, be it just ITM or deep ITM. Assuming they say exercised option is not a delivery trade, the bigger issue with that would be that IT department will then consider trading F&O as speculative and not as a business income. That will effect everyone who trades derivatives.
Dear Nithin
I bought PE 7100 1lot @14.1 and did not sell it till expiry
expiry day values is @0.05
nifty spot approx 7750
what will be STT ?
This will expire worthless, so you don’t have to worry about STT.
thx a lot sir
thnx sir ! I was not aware ….lot of thnx.
I had a problem today . I had some long 7800 Calls and I squared off 50% quantity by 3:15 Pm. After 3:15 Pm,The scrip has been vanished from my market watch (Nse now mobile app ) and I could not add it again. So the 50% quantity was exercised and had to pay hefty STT.. Infact not only this options , but the Current month futures I was holding also disappeared from market watch after 3:15 PM .
Is it normal that , the F&O segment will stop taking orders after 3:15 PM on expiry date for the current month ?
Leela shouldn’t happen. We didn’t get any complaints from anyone else using the NOW mobile app, so can’t really comment.
This is not the first time I see this. The last time i observed it however there was no impact as i dont have positions at that time.
All people might not notice it as its happening after screen change, For ex. If i am watching market watch and didnt do anything ,the quotes will show up. How ever if i Order or change the screen the another market watch and return to this screen, all present month are disappearing .
WIll try to confirm on this expiry .
But You can confirm that the trading wont stop on these scrips at 3:15 Pm.correct ?
Leela
Happened today also. Infact it started around 3 PM . All the Fut /Options of September series disappread from the market watch . I could add it again However when we refresh the screen or add another scrip (the screen will refresh ) it disappears again . Pelase test it on the next expiry 🙂
May be I have to switch to other platforms. I still face the issue of ” all the current month futures , options Disappering from market watch after a screen refresh from 3PM on expiry Day .
shouldn’t happen, will get our tech guys to connect with you.
2. If the options are expiring worthless (with 0 value), you don’t have to sell it to save STT because STT on options which has no value is zero.
Hi Nithin Took the Above from the Gist mentioned in Your Article , You Have mentioned as ZERO Value But All the Options Expire As .05 on the Expiry DAY so are they Considered worthless ,Because I Have a JP ASSO 75 rs call at .05 so when the Same expires on Sep Expiry, will the same Be Charged with ANY STT.
Nitesh, an option might trade at 0.05 because that is the minimum it can trade at. Many people like to exit options which are worthless, because it will free up margins which they might need to take fresh positions for the next series. But if you don’t have that constraint, you can just leave as it is and it will expire worthless.
If you have bought JP Asso 75 calls, and JP associates stock price at 75 or lesser, your option expires worthless. If JP associates expires anything over 75, the 75 calls now become in the money. So what this means is that if you don’t sell it, it will get exercised automatically. If you have bought this option, this is when the STT shoots up, but if you are someone who has shorted this option you still have nothing to worry.
Hopefully clarifies.
Yes Got Clarified Nicely Thanks A TON
I have sell coal india 340 at 6 rs put and not purchased it in same expiry cycle.
Now what will happen?
how it will be settle?
U have nothing to worry, Coal India closed at 346.75, so 340 puts would have expired worthless. So you get to keep the entire Rs 6 as profits.
Very informative and useful article..thanks for sharing it !!
Very nicely explained article it will be helpful for the traders, trading in options as a buyer. I am new to this post i will be very thankful to you if you answer my query. Once I bought an in the money call option of jpassociates lot size [email protected] at that time there was no open interest in this contract even after my buying also but as soon as i sold it lot size [email protected] it started showing open interest 8000 in nse web site and also in my trading software.
My query is that if i bought some one would have sold it so why it didn’t show open interest while my buying? But as soon as I became a seller and other side there must be a new buyer as i think so because if the old seller buys (squares off) it the open interest becomes 0. Can you explain me the reason behind this. If you can it will be a great help to me.
Note : i bought CE [email protected] at 10:15 am and sold [email protected] at 2:20 pm and it was the only trade on that whole day in that particular contract and it was an expiry day also.
Step 1 : Mr. A sold 8000 and I bought 8000 so OI would be 8000 but it was 0.
Step 2 : Now I sold 8000 and Mr. B bought 8000 so OI would be 8000 and it was 8000.
Step 3 : If I sold CE 8000 and Mr. A bought CE 8000 back then OI should be 0.
In my view first 2 steps were present there on that day 3rd step was absent because after closing the market OI was 8000.
I held my position for nearly 4 hrs. but OI was being shown 0 and when I sold it, it started showing OI 8000.
You are correct, if you had an open position, there should be an open interest. NSE open interest data is delayed by 3 mins, even that can’t be the reason in your case. Can’t think of any reason, why it wouldn’t have shown.
Suppose nifty is currently trading at 8050. latest single nifty lot size is of 25 qty. I predict the market to go up to 8200. I buy Call (Out of the money) of Strike price 7800 for a premium of 50 rupees , and don’t sell it even on the expiry day,If market reaches 8400 on expiry , what will be my profit or loss ???
is my calculation correct ?
net investment for single lot is 1250
theoretical profit Without any tax deduction=(8400-7800-50)*25=13750
what would be the net profit per lot if all the taxes for expiry date are considered ???
Plz reply….
Piyush, if Nifty is currently at 8050 and if you are buying a 7800 Call, it is In the money and not out. This option will be trading minimum at Rs 250. Out of the money would be 8200 calls. Assuming you bought 8200 calls at 50 and did nothing and market reached 8400, you make 200 points. Investment is 1250 , return is 5000 (you are buying 1 lot, so you need to multiply by 25), your net return is 3750
Thanks for the correction Nitin …
What if I buy “”IN THE MONEY call option “” ?? ie if market is trading at 8333 and I buy Call of strike price 8250 for Rs 168 , and on expiry market is 8500 , plz tell me the profit calculations….
so my investment for single call lot of 8250 is 168*25=4200 what would be other taxes and total taxes calculation ???
use our brokerage calculator
Hi Nithin,
I am new to Zerodha. I want to ask simple question for STT on expiry day. Below is the situation.
ON Expiry Day I have bought 1000 lots of 8500 call & 8500 put @1 Rupee with MIS options
My total cost is 2000 rupees + 40 rupees aprrx 2050 rupees.
At 3:21 as per MIS my position gets square off. however there are no buyer in both my strike price
Will it be square off or i still need to pay STT in that case.
Please advise early as 2morrow is expiry 😉
currently Nifty spot is 8475
Thanks
Kishan
Kishan, if there is no liquidity at 3.20 pm, that will mean that your positions will not be squared off. In which case, yeah you will have to pay higher STT in case the options expire in the money. But that said, I don’t remember ever seeing liquidity dry up in Nifty options. So if you are trading them, you are okay.
Hi Krishnan ,
Whats the benefit of doing options trade using MSI instead of NRML.
No benefit if you are buying options, but if you are shorting options the margin required is only 40% of the overnight margin requirement. Check this post.
Dear Nithin,
Thanks for sharing your knowledge
your understanding regarding market is really very good.
Hello Nithin,
Thanks for great post.
Can I post this article on my website as It is giving you the full credentials.
Regards,
Nik
Yep, you can. 🙂
Thank you so much….Cheers….
Dear Nithin,
Thanks for this kind of forum to educate people, I really appreciate if u just answer my query.
if I sell a call or put and it expires out of the money do i need to buy it before it comes to zero or will i get the whole premium on which i sold, as profit .
Thanks,
Manoj
If it is expiring out of the money, you don’t need to buy it back, you can just let it expire at zero. There is no risk of higher STT.
Dear Nithin thanks for reply but my main motive here is to know whether i will get whole of the premium that i sold earlier on expiry without even buying it.(i.e expire as zero).
thanks,
Manoj
Absolutely, you get the entire premium, check this post.
Sir,
I have bought HUL JAN 750 CE @6.00 Currently 750ce is trading @146….if HUL closes @950 at expiry, 750 CE at 200, will i get (200×500)-((950×500)x0.125/100)=99438 in my trading account???
Is it possible ?? where will i get the money from???
So you have bought 750 CE @ 6, so if HUL closes at 950, your 750CE would be valued at 200. So you would make a profit of 500 x (200-6)= 500 x 194 = 97000, and yes you will get back 500 x 200 = Rs 1lk for this option. This money you will receive from the person who had shorted the option.
what if i haven’t squredoff my ”future” position on the expiry ???????
No such issues with futures position. STT charged remains like normal.
Hello Nithin,
Recently I observed once, Zerodha network(server) going doing down while I was trading at the day end.. Usually on expiry day/hour I trade heavily ranging from thousands to lakhs in Nifty quantity. Assume I bought Nifty 8300pe, 100,000 quantity at 0.1 Rs in last 30 minutes and Zerodha server goes down and I could not able to square off and Nifty ended at 8299.. In this scenarios I will be in loss of
(8300 * 100000 * 0.00125) – (1 * 100000) = 937,500 Rs.. Its huge.
So, how you going to handle this instance? As it is not a mistake from my side!!
Darshan, there has been no issue from the server side in the last few months, I guess there was once for a little while 3 or 4 expiry’s back.
Thanks for the reply Nithin, Yeah I hardly faced issues with Zerodha, It happened to me only once/twice in 2 years (not on expiry day).. I am happy with Zerodha platform.
Above scenario is an imagination, I was just curious to know how you can sort out such things! Never mind.
Thanks you,
Darshan
nifty is trading at 8500 today means if i bought 10 lots adopting call option of 8700 means, what is cost of that ?? And what is my Profit (or) Return)??
hmm.. can you ask the question in detail. Not able to figure out what you are asking. You can ask market related queries here: http://tradingqna.com/
hi
I m deepak.I want to know is stt applicable for currency options and futures…
and what will be stt only for futures contract…
Deepak, for currency trading (both F&O) there is no STT in India yet.
STT for Equity futures is 0.01% on the selling side.
thanks nitin
will u plz tell me one more thing how much stt I have to pay for option trading.
Check this Deepak, all your charges are mentioned on this.
If a bought option expires in ITM , IS it mandatory to exercise the option. In my opinion Option means I have an option to exercise or not. If the difference is negligible , to prevent STT payment can I opt not to exercise the option, although it is in profit side.
Vipin you can sell the ITM option in the market anytime before 3.30pm on the expiry day. But if you end up holding it after market closing, it automatically gets exercised as it is the last day of expiry.
Hi Nithin,
Awesome post! Thanks. Read all the comments too 🙂
One query from my side,
For example,
I bought 1 lot (1250 nos) of 300PE of SBIN at 5 Rs.
At Expiry, SBIN closes at 200 Rs.
Since there were no buyer, I was not able to sell my holding before expiry.
So does that mean, I will receive, 1250 * (300 – 200) = 1250 * 100 = 1,25,000 Rs into my account?
Since I didn’t sell my put option, do I need to pay STT? If yes then how much?
And if this was CE instead of PE and if SBIN had closed at 400 on Expiry, then how much will the STT payment be?
Thanks,
Kaushik
Yes Kaushik, you will receive R 1.25 lks when it gets exercised.
Yes since you didn’t sell, it would be higher STT. Rs 400 (strike price 200 + premium 100) * 1250 * 0.125% = Rs 625
If you had calls and SBI closed at Rs 400 it would be; Rs 400 (Strike price 200 + premium 100)* 1250 * 0.125% = Rs 625
Cheers,
Thanks Nithin for the prompt reply. Really appreciate.
Please explain – Urgently
I bought nifty call option of Strike price 5900 at Rs. 60
Please let me know in following three case, it will be ITM ( In the money ) call option or Out of Money
a) if nifty close at 5975
b) if it close at 5955
c) if it close at 5875
Dilip, it is called in the money if your option has any intrinsic value.
1. 5975 is 75 points above 5900, so 75 is the intrinsic value, so yes ITM
2. 5955, is 55 points above 5900, so 55 is the intrinsic value, so yes ITM
3. 5875, below 5900, so 5900 calls has 0 intrinsic value. So out of the money/OTM
I had shorted Bhel 250 call @2 rs and let it expire(not bought back) .
Finally Bhel LTP was 250.20, as it is ITM now so what will be the profit i will get.
Your total profit will be 2- 0.2 = 1.8 x quantity/lots of BHEL you held.
Thanks Nithin,
Just wanted to confirm that it happens on LTP(250.20) or Close price (252.20)?
There were still buyers @2.30 in option at the last moment(3:29 PM) of expiry even BHEL was trading at 250.20. Why so?
Please update.
Didn’t understand your question. All futures and options on the expiry day will get settled based on the closing price of the underlying. The closing price of BHEL is weighted average of the last 30mins price. So the ltp and close price might be completely different, but all buyers and sellers will be trying to place orders based on the expected closing price.
Thanks, Got you.
Settlement happens at closing price and not the LTP of underlying.
Sir
it is a compulsion to auto square off any O/S future contract for current month on expiry date but
i have 3 lot of nifty sell of jan 2015 month @8405 even on today in my portfolio unrealizred as i forgot to square off it.
i have checked ledger also that no money has credited in my account which i paid as margin.
please suggest how to get it back
Thanks and regards
No Mr Gupta, this is not possible. All JAN positions would have been settled on the expiry day in Jan. If you are trading at Zerodha, send an email to [email protected], someone will call back and explain.
Hi,
I just want some clarification on this.
Suppose I buy a call option of XYZ company with Strike Price 120 and Spot Sprice of 100 at 5Rs.
Now on the last thursday the Spot Price rised to 118.
What will be the premium price of the Call option.
will it be 0 as it is not crossing 120 or it will increase as from 5Rs to some amount as the Spot Price I bought at is increased by 18 rs.
Please help me on this.
Viral, on last thursday it will be 0 if you held these options until close. You should read up the Futures and options module on Varsity: http://zerodha.com/varsity/
Hi,
I have a doubt. Consider nifty is at 8360 on 25 June(expiry day), i short PE of 8300 and short CE of 8400 at a premium of INR 30 and 40 respectively.
Now, my question is since it is the day of expiry is it compulsory that premium for both 8300’s PE and 8400’s CE will closed at 0?
Second, what is they both closed at 0 and since i short them, is it necessary to buy them again?
Please help.
thanks in advance
regards,
Arpan
1. No it is not compulsory. Only if Nifty closes within the range of 8300 to 8400 will both 8300 PE’s and 8400CE’s will close at 0.
2. No not required to buy back. You can just let it expire worthless.
i took Glenmark option 980 put @ 15 ,
but today as expiry is there current premium price is near 10 to 12,
and Glenmark price is 977,
so if i left open till 3.30 and if PRICE close near to 975-977 then how much profit / loss will be there after getting STT & other charges.
thanks in advance if u can reply early.
SK, whatever is the value which glenmark closes below 980 will be the value of your option. So if Glenmark closes at 970, your 980 puts will close @ 10. If you let it expire, and not square off, STT will be charged at 0.1% of the contract value. Lotsize of Glenmark = 250, so 0.1% of (250 x 980)around Rs 250 will be STT. Other charges you can find on http://b.zerodha.com/
what about option purchased premium if left option expire?
when glenmark closes on 970.
thanks a lot bro.
Guess ur question is when glenmark closes at 980. If it closes at 980, 980 puts have 0 value.
I had bought 5000 PUTS NIFTY 8400 PE on 25 June 2015 on the expiry day at 3.26 PM. At 3.30 the Index was at 8415. But after settlement NIFTY closed at 8398. I was asked by my broker to pay Rs 42000 as STT.
MY QUESTION : A BUYER OF AN OPTION CONTRACT IS NOT OBLIGATED TO SELL OR EXERCISE AN OPTION BY THE VERY DEFINITION OF OPTION CONTRACT.THEN WHY SHOULD THE BUYER PAY STT ON THE OPTIONS HE HAS NOT EXERCISED?
AN OPTION BUYER HAS THE RIGHT TO SELL OR EXERCISE THE OPTION BUT NOT OBLIGATED TO EXERCISE OR SELL.
Joe, all options that expire in the money are automatically exercised.
Turnover 45,511.25
Brokerage 1,610.00
Serv. Tax 229.54
Trxn. Chrg. 22.76
Other Chrg. 6.83
Stamp 1.00
STT 1,159.00
Gross Amt. 2,391.25
Net Amount -637.88
please tell me STT is right or not
STT will depend on what kind of trades you did, futures or options. Looking at the higher STT you have paid, looks like these were option contracts that you let expire in the money. Like the blog post explains, the STT can be quite high in such cases.
NITHIN,
Please refer to my previous post of having to pay Rs 42000 STT on 5000 contracts of NIFTY 8400 PE expired ITM after trading hours at 8398 on 25 June 2015.
Will I have a legal standing on the grounds that the buyer of an option contract is NOT OBLIGATED TO SELL OR EXERCISE his option? A buyer of an option pays a premium like we pay an advance amount to buy an asset at a later point in time. If one does not exercise the option the advance amount paid is forfeited.
Thanks,
Joe
I have short(sold)one lot of Nifty PE 6000 @ premium Rs.150.Today the premium is @Rs.250.
(Nifty Spot .8350).
The loss is Rs.2500/-( 25*100) at this moment.
If I do not square off the trade and if the nifty will close (spot) at 8400.on expiry date Then what will happen to me. (if the premium remains 250/- on expiry date)
My guess is that you have short 8600 PE (not 6000 PE). If on expiry Nifty is at 8400, 8600 PE will expire at Rs 200, and you will forcibly book a loss of 50*100.
Thanks Nitin.
[…] http://zerodha.com/z-connect/queries/stock-and-fo-queries/stt-options-nse-bse-mcx-sx […]
hi nithin ,
plz clear my doubts
1) stt for index option and stock option is same ? it is 0.125 % ( if option exercised by exchange )
2) at what closing price they exercised ? ( index spot price or index fut & stock price in cash or stock fut price)
1. Yes.
2. All futures and options get settled to the underying closing price.
nifty closing price is calculated by weighted average of nifty in last half an hour 03.00 pm to 03.30 pm ( source – nse )
how to calculate nifty closing price by weighted average ??
what is exact formula to calculate weighted average of last half an hour ?? what includes in formula ? ( price ,volume or time ?? )
It is a standard weighted average formula. But it will be very tough for you to calculate this on your own, as that would mean having to capture all the trades done during that time.
Hi Nithin,
Thank you for your informative post. I have a question though:
Suppose I have an option and it is deep out of the money. So obviously it is going to expire worthless and as you mentioned no STT will be charged on it. But will brokerage be charged by my broker (ICICI Direct) for letting it expire worthless ? Please answer asap as expiry is tomorrow.
Best wishes,
Satender Kumar
I can’t say about ICICI direct, but at Zerodha we don’t charge any brokerage for contracts expiring worthless.
On expiry day (last Thursday of the month), do MIS options get squared-off at 3:00 pm? I understand that on other days, these orders automatically get squared-off at 3:20 pm; however I am not sure if it works the same way on expiry day as well.
Yes, works same way on expiry.
Sir, I am small retail trader, today i bought Nifty Aug 7950 PE (20000 qty)and I squared off two times. But it is not squared off and the option is in the money. please help me sir
If the option expires in the money, there’s pretty much nothing that can be done. The STT is levied and is paid to the Government. You’re left with no option but to pay the STT.
I squared off two times through admin position but it was rejected. Now they say i have to square off 10000 every time. Nithin sir please reply
Anand, exchanges keep changing limit for maximum lots that can be placed in a single order. Currently it is 10000 or 40 lots for Nifty. It is different for every scrip, these are things that every derivative trader has to keep in mind. Also when you place square off using admin position, you have to wait till the net position becomes 0, otherwise it indicates that you have pending quantity.
Sir, if I place individual order, 10000qty is OK. But I used square off at market price through admin position…but that square order get rejected because qty exceed more than 10000. Whether square off also every time we have to partially…
Yes anand, when you square off, an order with that quantity is sent to the exchange. If the quantity is bigger than maximum order size set by exchange it will get rejected. So yeah, if you are squaring off from admin position, you will have to do it partially if quantity is more than 10000.
I bought Nifty 7950 PE Aug 15 @ 0.80 paise around 3.27 PM,I saw it going around 0.30 and so left out without selling assuming it’s going to be zero.
Seeing the contract not I got shocked that the STT was Rs.1987(for 200 Qty).So for something I bought for 1\Rs.160 i have ended up paying so much.
This is extremely bad on the settlement part.
Anyways lesson learnt and this is worst thing in place unfortunately.
Nithinji, I same doing like vijay do. I bought 7950PE @1.80 at3.15 PM. STT Charge 9936/-. Why this heavy STT. Pls explain.
RB, it is explained in the post above. We do our best as Zerodha to educate by putting up these posts, and also sending out messages on terminals to ensure squaring off in the money options on expiry day.
Nithinji, Yes i Know Zerodha is best, I use it last more than 4 years. But i Want to know , what is caitaria to calculate this STT panelty or charges whatever it is, can you inform me on this or where i get information on this ????
Pls. Guide.
The criteria is if you leave any in the money option position open on market closing, you’ll be charged STT @ 0.125% on the contract value (Strike+Premium)*Lot Size.
So make sure you close all ITM options.
Here’s the NSE Link: http://www.nseindia.com/products/content/derivatives/equities/sec_tranc_tax.htm
Look for “Sale of an option in securities, where option is exercised”
Thks, Team Zerodha.
Hello Sir,
I have sold a put of 7100@32 rs per lot…. currently the rate is 45.. so I am at loss of 45-32=13 rs.. (for september series)
Assuming that the nifty doesnt expire at 7100 in september. Would the value of the 7100 put be 0?
Thank you
Hi Nooper,
I am one of happy client of Zerodha.
If Nifty expires at 7101 at last thursday of september then also put value of 7100 at that time would be 0.
But to sell put in such violent times is bit risky, for eg. if nifty plunges 300/400 points from here – then this premium went up like anything and you may be at big risk…instead go for call buy if you are bullish.
as you know selling call/put is having fixed profit , unlimited loss strategy, so please think.
i am not against selling option – but adhering to strict money management is must.
Hope i am answering your question right here.
If Nifty closes above 7100, yeah the value of 7100 put will be 0. Check this to learn more on options http://zerodha.com/varsity/
Hi Nithin,
I am a zerodha customer, recently I have done some future selling and noticed high STT, please could you help me on this.
Appreciate your time & advise you give to the people
Regards,
Naveen
STT is charged by the govt and is fixed at 0.01% on the selling side. yeah, it is quite a high charge, but nothing can be done about this.
thank you Vikas
Sir and Nitin Sir for your prompt r eplies…:)
@Vikas Sir..
I understand what you are saying… I am just trying to implement a strategy… hope it works…:)
Hi Nithin,
Case :-
(1) I pledge TCS shares 250 with you.
(2) I write 2 out of the money TCS call (covered calls) and get the premium in my account. – STT paid.
(3) The call moves into the money – What happens on a non-expiry day? What happens if held till expiry?
(4) The call does not move into the money – I let it expire. Nothing to do. no more charges ?
(5) The call expires at the money ?
Thanks,
Jayesh
Jayesh,
When you short options or trade futures using the pledged margin, it is best to keep some extra cash for any MTM losses.
3/5. If the call moves ITM, the margin required will go up. If you don’t have enough money in your account to meet this increased limit then the position can get squared off. But if you are pledging 250 shares and shorting only 250 call options, there is no need to worry about it as you will have a lot of free margin. If on expiry the call option closes more than the price at which you have shorted, that much of loss will be debited to your account. If it is lower than what you have shorted, the margin frees up and you would be still in profit. No need to worry about any extra STT or charges.
4. Yep nothing to do, no more charges. When you short options, ITM/OTM/ATM, STT is already paid while shorting, so no extra charges.
4.
Thank you for the reply Nithin,
(1) How is day to day MTM handled for the covered call I sold.
eg. I sell the covered call (same number as pledged) for Rs. 30 (30 *250 = 7500) .
The next day the call moves up to Rs. 40 (MTM = 40 *250 = 10,000) . How is this MTM handled ? or is it only adjusted on the last day if I let it expire.
(2) How is the loss on expiry adjusted (if the option moves ITM) – by selling the shares ?
Thanks.
1. Unlike futures MTM is not directly proportional to your losses. When you short options, the margin blocked goes up if the position goes against you. There is no direct math, you can check our span calculator daily to get a hang of this. https://zerodha.com/margin-calculator/SPAN/
2. Yes on expiry if there is a net loss, the shares will be sold. So it is best to keep some cash as buffer.
Thank you so much Nithin.
Hello Sir,
One question – I have sold a put on 09/16 at a strike price of 7500… at a premium of Rs.28/-
Assuming…market goes down tomorrow and the price goes down from spot price (7800) to say 7600
and say the premium of the put goes up from 28 to 52 rs…
However, it doesnt reach 7500 by expiry.. do I have to buy it back at a loss or can I let it expire?
Nitin Sir, please clear my doubt
I had shorted Nifty 8000CE at 40. if nifty close below 8000 i will get full 40 point.
my question is,,
1. i don’t want cover it and at expiry day it will go to settlement. is this showing on contract note getting on expiry day??
2. when will premium showing on my ledger? is it on same day(expiry day) or next trading session??
If Nifty closes below 8000 on expiry day, you’d get the full 40 points.
1. Yes, we’d be showing it on the contract note.
2. Premium shows on your ledger the same day (day you shorted the option). You can check the value of short options in your ledger by checking the Pie chart on Q’s login.
Hi Nithin,
One question, done lot of research on it, but not found satisfactory solution, as no example is given with premium =0 at expiry for ITM put option.
Question: suppose I bought put option of company X as below
Strike price : 900
premium : 20
share spot market price : 950.
quantity : 250
now at expiry, the put option price is as below
premium : 0
share spot market price : 450
I did not sell my options, and let is exercised. now what will happen to my trade? Is trade is in profit or loss?
Please clear my doubt, as I have seen this case in Adani Enterprises when it splits in sub companies and share falls around 80%.
So there was a corporate action like stock split or bonus or something like that. Assuming there was stock split, share price will drop to 475 (instead of 1 share at 950, u have 2 shares at 475). So all strike prices will also reduce on that day. New strike price will be 450. So instead of 250 quantity short at 20 of 900 puts , you will have 500 short puts at Rs 10 of 450 puts. Since stock is at 450, you make the entire Rs 5000 as profits ( 500 x 10)
thanks nithin for clarifying my doubt
Hi Nithin,
I understand that there is no STT on currency options. However, if I let some ITM option of say value .5 rs expire then what will be the calculations of total transaction charges for both long and short positions in currency.
Thanks
DK0046
Transaction charges for options would be charged on the premium @ 0.0044%
Hi Venu,
Are you replying to my query on currency options for the ITM options at expiry? Do you represent Zerodha?
Thx
Yes Venu heads our compliance. Since there is no STT, the only thing you will pay on expired options is the exchange transaction charges which is 0.044%
Hello Nithin, I am a New zerodha customer. Nice committed effort from you towards cust service, by the way. I have a query on extra STT charges in my account. understand the STT for equity transactions is only for sell side at 0.1% of total sale value. I had bought and sold 5500 shares of NMDC (price under rs.98) at different points of time during last 30 days. So maximum STT charged should be about rs. 550, correct? But when I check your back office numbers in the P&L query, it shows total STT deducted as rs.725 on the equity side. I had traded in no other stock in equity other than this stock till date. In F&O side, I am yet to go through my first option expiry date (Oct 29), so no question of additional STT charged previously from any exercising actions etc.. Can you please explain such discrepancies? Also I am seeing STT charges on buying equities also at 0.1% in the zerodha order confirmation attachments you email me every day. I can’t understand if it’s a gliche in your software or has the govt changed policy.
Thanks and best regards, – Jay
Jay, on equity delivery it is 0.1% on both buying and selling turnover. Check this. If any intraday equity done, then it is 0.025% of the selling side. If there is still a mismatch, send an email to [email protected] with ur client ID .
Hi Nithin,
One Doubt,
Suppose I sold one lot of Nifty 8500 CE at premium 15, and at the expiry nifty was at 8200, I let my option to exercised,
Not at expiry premium will become 0, So what will happen to my trade?
Am I in profit? how everything will be calculated? did I get ” (8500-8200)*lot size ” as profit or something else?
When you short option, the maximum profit is Rs 15. So if Nifty closes below 8500, your maximum profit will be these 15 points (Rs 15 x25) per lot. Suggest you to go through the F&O module on: http://zerodha.com/varsity/
If I am out of money on the put purchased ( strike price is lower than market price) then is it safe to allow to expire without square off. STT in theory should be zero ?. Am I right.
Yes, if your option expires OTM, no STT is levied.
Thank you Nitin for your prompt reply. if this is true that for equity transactions the Govt charges STT (that too 0.1 % which is very high and eats away at your profits.) on both buy and sell side, then how is it fair? As that would mean on each transaction, STT is being charged on both parties. So in other words, If I buy and sell a security, I pay STT twice already and on top of that my counterpart investor also pays STT twice again on behalf of this same event. So in other words, a single buy and sell transaction will let the Govt to charge 4 times STT from both parties ? Such a policy would run against principles of natural justice for any policy, govt or otherwise.
2) For that matter, same case can be made even of charging of exorbitant STT charge, a policy aimed insidiously at retail investors and those holding on to ITM options , that too when no actual delivery is involved and for all practical purposes is simply a cash settled derivative transaction.
3) This is especially absurd when you consider the non exercisable and non deliverable nature of Index options when coupled with their artificially high standardized price.
4) Lastly, Automatic exercise rule also violates the principle and spirit of a contract, which is ‘Optional’ by its very nature.
I am not legal professional but if one could find a good attorney to take on the big Govt losers, I am sure we got a case here.
For all delivery transactions STT levied is 0.1% on both buying and selling whereas on Intraday transactions its 0.025% on the selling side alone.
STT does act as a major deterrent for the market participants but then its a charge set by the Govt. and we’ll all have to live by it. There have been several representations made to abolish STT but no major steps have been initiated by the Govt. to do so.Recently BSE has proposed to the authorities to replace STT with LTCG. Ref:http://timesofindia.indiatimes.com/business/india-business/STT-structure-biased-towards-speculative-derivative-trade-BSE/articleshow/49524776.cms
As far as the higher rate of STT for exercise is concerned, India is among the only few countries where exercised stock options are cash settled, in most developed markets exercised stock options usually mean taking/giving delivery of the underlying. Yeah, Index options are mostly cash settled. If you look at the road map set by SEBI (can’t find the link), India would eventually get to a point where there would be actual exchange of underlying if the stock option is exercised, it might take time, but we will eventually be there. Hence STT on exercised options, are charged based on theory, that the buyer of the option takes/gives delivery based on calls/puts in case of him exercising. (Reference:http://tradingqna.com/)
Also on your back office site, the kite dashboard shows me different numbers even during off market hours like even on a weekend days, It would show my total amount as different and then again it comes back to same value. Even though no trading is taking place and market is closed. Also the site leaves a lot to be desired such as being beta product , having a poor interface etc.. Not a sucker for cosmetics but I appeal to you to at least give highest priority to keep the numbers right, have additional backup servers and infrastructure etc.. as it is all our cash and equity in there and goes a long way to help investor confidence and be able to sleep at night knowing our funds are in good hands and with a broker with integrity which is supposedly the main reason we chose Zerodha. Thanks and with best wishes – Jay
Ideally it shouldn’t change. We’ll check why it happened.
Dear Nitin, If i hold Nifty futures till expiry at what price will it get settled ( LTP of index or closing price of index or weighted close of futures in last 30 min) ? On the day of expiry if the futures contract is at a premium of say 10-12 points will the premium disappear?
Regards
Gaurav
Exchange will calculate a settlement price based on the weighted average of the last 30 mins. Futures will be MTM’ed against such settlement price. Typically on an Expiry day Futures price will reconcile with the Spot price.
Venu, i take it that you mean “Expiry” day and not “Futures” day. Thanks a lot for the clarification.
Regards
Gaurav
perfect! have made the correction.
Also all brokerages including zerodha loans out our equity shares and it aids the big houses to short the market and make money in options market as well. You brokerages make money loaning our equity out and they make money by shorting the underlying and selling option premiums. All the real time data including real time open interest data is not provided and has access to this data only for rich fund houses and brokerages which are well connected to NSE and the policies of SEBI are also geared towards fleecing the retail investor of modest means like the recent hiking of option lot size (supposedly to protect small investor, but we know it only favours the big money by doubling or tripling the cost of taking each position which does not effect big money because they take large positions), I can name hundreds of policies that are geared towards parting the small investor from his hard earned money.
Jay, don’t know about other brokers. But if you are trading at Zerodha, once a stock hits your demat account, it is never debited until you place a sell order. We don’t have any concept of keeping stock in the pool, like many other brokers do.
So I have few questions for you at zerodha, kindly answer
1) Is the option interest numbers shown on Pi interface updated on a real time intra-day basis? By real time I mean updating within a few minutes at a time not exactly on a per minute basis.
2) Is there any Live RSS feeds feature that I can subscribe through Zerodha. If so, what would you recommend to get fastest news on earnings, corporate announcements. Your new Zerodha plus is just aggregator and it gets news from second hand media channels such as NDTV profit etc. so It is much slow and delayed news.
3)
1) Yes, its updated as per the data received from the Exchanges.
2) No, we do not have any such services. You may have to get in touch with 3rd party vendors who provide such facilities.
I have one very basic doubt.
I write an put option at strike 7700 at premium 45. Spot is 7900.
So what happens as and when premium moves up or down. Do the buyer has the option of squaring it off and will i be assigned in that case?
How will it affect the option writer if premium moves up and down , but spot never goes below strike until expiry.?
When premium moves up, as an option writer u r losing money. Automatically the margin required to hold this short option goes up. All options in INdia are european, so the buyer can’t exercise the right until the expiry. The buyer can just go out and square off his position by selling on the market.
Premium is directly proportional to how the spot will move, so technically not possible that premium will move up but spot never goes below strike. Suggest you to go through the options module on varsity http://zerodha.com/varsity/
Hi Zerodha Team,,
I read your blog and the module 5 of option trading and found it quite impressive.
I want to carry out my first trade but i have two questions
I want to short a OTM call for this month expiry at NIFTY , and will square off it with buying it back on the expiry day.
1.)I calculated with the zerodha SPAN that showed me around 37 thousand rupees would be blocked.
suppose i carry out the trade, will my margin be credited to my account when i square -off my write option with BUY , if yes , then when?
2.) instead of going with this method ,how can i go for covered call, i am to understand the covered call with stocks , but not getting it with the NIFTY index.. may you help me cos i have been stuck with the position of margins ,like what happens with the margins ..
Thanks
1) Yes, when you square off our positions, the margin blocked for having written such options will be released. It’ll be released the day you square off the option
2) Covered call is when you short a call option while holding stocks of the same underlying. You do this when you expect don’t expect the stock price to go high in the near future. You’ve to hold units of Nifty bees if you’ve to write Nifty covered calls
Bought call of Tata Motors DVR strike price 300@ 3 but didn’t not sold the same on expiry but underline closed at 301.95, Pls advice whether my contact will expire at premium which was 0.05 or at in the money value that is Rs 1.95.
Option has expired in the money. You’ll get a credit of Rs.1.95 to your account
Last traded price was 301.95 but average closing is coming 299.75.
If the settlement price is below 300, option will be out-of-the-money and it would have expired worthless.
Dear zerodha team,
If i sold an option, if i dont buy it back and the option expire worthless when will the margin money be credited back. Or is it necessary that i have to square off the sold position even though it is going to expire worthless.
Regards
Sreejith
If you don’t square off the money is credited on the next day after expiry. If you square off, it is still credited next day, but you will have margin to use for other trades.
sir,
please add ichimoku chart to pi chart
Hi Nitin,
Can I write only 1 call/put option and square it off later?
Or is there a minimum amount of lots that need to written?
Kindly explain.
Thanks,
Virendra
Yes, you can write 1 lot of call/put as long as you have the requisite margins for it.
Hello,
I’m new to options. I tried to found my case on above comments, but it’s taking long time as it’s having 1000’s of comments.
Need clarification on:
Brought Call option of BANKNIFTY DEC 16900 @ Premium Rs. 126.77 (Rs. 3800/-)
How do we trade on this, means on premium value or Index value or futures value?
1. What will happen if close my position before expiry with the following values,
BANKNIFTY DEC FUT @ 16930 BANKNIFTY INDEX @ 16988 Premium @ 109
2. If I hold the my call till expiry till the expiry date with same values.
What will be the profit/loss in both the cases, pls illustrate calculating profit/loss clearly and step by step.
I’m thinking that BANKNIFTY DEC FUT value will not effect this, I mean no need to consider FUT value, is it?
Also need illustration for
BANKNIFTY DEC FUT @ 16830 BANKNIFTY INDEX @ 16850 Premium @ 90
1. If you close your position before expiry, your profit/loss will be: (Value at which you sold) – (Value of at which you had purchased).
2. You’ve bought Bank Nifty 16900 CE at 126.77 which makes your breakeven 17026.77 (16900+126.77), if Bank Nifty closes above this price, you’d make a profit, else you’d make a loss. On expiry if it closes at 17500, your profit would be (17500-16900-126.77)*30 = 14196.90
Futures & Options are all derivative products which means they derive their values from the value of the underlying, the Bank Nifty Index in this case
I suggest you go through the basics of options here: http://zerodha.com/varsity/module/option-theory/
Thanks for fast reply sorry for bothering you,
if I’m not wrong,
In note 1, value means it’s premium value
in 2, On expiry if it closes at 16950, How much may be the loss.
i. Loss total premium (3800 Loss)
ii. 50 x 30 = 1500 Loss
pls let me know
As I gone through the given link and If i’m not wrong below is the my assumptions.. pls let me know are my assumptions are correct or not, Thanks
In the above excel sheet, there’s a mistake. Intrinsic value can never be negative, if it’s negative consider it 0. This is why you’ll never lose more than what premium you paid. Loss will never exceed 127*30 = 3810, the premium paid.
1.Yes, premium value
2.If the settlement price of Bank Nifty is 16950, you’ll lose 126.77 – 50 {16950-16900} = 76.77*30 = 2303.1. You don’t lose the entire premium because you’re in the money by Rs.50
Just too Good Information with all logics and answers..
Hatsoff to Zerodha people with such sound knowledge and guidance..
Regards,
Sir
If I do short selling of nifty and wait till expiry date until its value becomes zero . then shall I have to square off it on the last day ?? At the value zero. Or it will get auto squared off . and I will get my premium value.
You don’t have to square off, it will expire worthless and you get to keep the entire premium.
Please download and read this small book, published by NSE, u will be expert in Options… 🙂
https://www1.nseindia.com/live_market/dynaContent/live_watch/Bank_Nifty_Option_Strategies_Booklet.pdf
I bought SBIN Mar195PE @0.4 20lots(2000*20) today around 3pm but didn’t sold it at expiry i.e before 3:30. last traded price after 3:30 for SBIN is showing 194.25 but premium is showing 0.4 .
What will the final amount i will receive(any profit!!) and what will be STT amount deducted from my account?
You will receive gross 0.75 (around Rs 1500). But STT on this will be 0.125% of approx (195×2000) around Rs 400. So you will probably net get around Rs 1000
I had a call option of axis bank strike price 440 bought a@rs 5.5. I let it expire today the i.e the expiry day.The closing price of the stock in cash is 444.15.On which price my position will be settled by the exchange. Please let me know…
All options are settled based on close of underlying. So you will get back Rs 4.15 on this option.
Hi Nithin,
Thanks for the nice write up. I have a doubt. As of today Nifty 7800 CE is trading at 120/- and the market seems to be in bull mode. Upon expiry say nifty is trading at 8200, the premium of nifty 7800 CE should shoot up right? But as there is no time value will the call option reach to zero? please clarify. Thanks in advance
Yes, the option premium is a sum of Intrinsic Value, Time Value & Implied Volatility. The Intrinsic value of a 7800 CE when Nifty is at 8200 is 400, which means 7800 CE will be trading at a minimum price of Rs.400. There’s a lot of content available on Options on Zerodha Varsity here which would help you in understanding how options work: http://zerodha.com/varsity/module/option-theory/
Thanks for the quick reply venu. I have read the varsity material but a little bit confused here as I did not have the practical experience. so on expiry day 7800 CE premium value will come to zero?
No. 7800 CE will be at 400 if Nifty reaches 8200 level
What if I sell OTM call @ Rs 0.05 with lot size of 39000 and didn’t square it off ? What will b my profit or loss or any charges that may attracts?
If you have shorted it, STT is already paid, so you don’t have to worry if the contract expires. If the contract expires worthless, you profit would be the entire 39000 x 0.05
Thank you so much for your fast reply.
Thanks for sharing such informative article. This has really cleared this doubt of mine.
Nithin, Need a small clarification. For example I sell an option as normal order for 0.10 and it expires worthless and I did not square off.. What will be my buy value during settlement is it 0 or 0.05 ?
You’ll get to keep the entire 0.10, your buy price will be 0 if the option expires worthless.
What if there is no buyer for Option on the Expiry Day. then how it is possible for us to Square off our positions.?
And if there are no buyer in the market than where the money we have used to buy options goes..?
That is the risk of buying options. All positions are compulsorily exercised. So whoever sold the option to you, has to compulsorily buy back at the settlement price.
Dear Sir,
I had bought 10 Lots of Nifty May 8050Ce today @2.15 which was sold today @19.65 thus making a profit of around 13k but to my surprise I was charged 7.6k as stt,& received only 5.5k.Also I had put almost 15+ orders on kite mobile but it was rejected everytime.When i had coordinated with your executive in evening it said that your position was squared off @3.30pm.Can someone please clear everything at earliest.
Regards
Max
DS7300
Max this question was not deleted, I had missed answering.
Firstly like the post above explains, STT on exercised options is much more. If there is any account specific queries, you need to send it to [email protected]
Dear Zerodha
I bought a Nifty May 7650PE lot but couldnt sell it today (Expiry Date) so what is the solution???
It would have expired out of the money or worthless. You don’t have to do anything.
Why does this increased STT not applied in case of future contracts???
Only in case of options are the exercised contracts considered as a delivery trade.
sir how much profit i can make at the end of june contract if i buy june nifty index at 5000 strike price(assume nifty close at 8100)
You will make 3100 (8100 -5000). It doesn’t make any sense to buy such deep in the money options as they are illiquid, you rather trade futures.
plz clarify this doubt if i buy NIFTY JUNE 2700 strike price by paying premium 5463 1 lot (=75) at the end of june expiry date how much profit i can book ??? if nifty closes at 8000 level
8000 – 2700 = 5300 is what u will make. so if u r buying at 8463, you will loose 163 points. It doesn’t make any sense to buy such deep in the money options as they are illiquid, you rather trade futures.
I want to ask if we buy or sell any currncy any sm specifie price can we hold on the currancy till its expiry date .if v r getting a huge losse on same day nd after some day we get profit at same trade can we do that
Yes, you can hold it till expiry. Also you don’t have to worry about any STT on currency trading.
Sir, I’m not clear about charges of Stt. I exit before closing the market but still high amount of Stt charges debited
from my account daily. Please, could you clarify it for me.
STT charges are fixed by the government, check this for a list of all charges: https://zerodha.com/charge-list
I have brought rcom future at 47.50 and short a rcom 47.50 call at 2.65 kindly guide me what happens if i dont square off on expiry day.what would be the stt on futures and option.kindly guide
It will depend on what price RCOM closes at. On futures STT doesn’t go up if let to expire. On options, STT will become higher if Rcom closes above 47.5, ie when call option closes in the money. What would be the STT, already explained in the post above.
How to roll a future position in stock futures and nifty futures.how to do the rolling kindly help
Rolling over means, exit the current month and take the same position in the next month. Sounds fancy, but that is how simple it is.
As i am short in rcom call option therefore i have already paid stt and there is no stt on buying side and if rcom call closes in the money even then i have to pay stt on not squaring it?
No, u don’t have to pay STT on expiry if you have short the options.
Sir,
If I had sold a nifty lot of PUT option of say 8400 at 200/- .
And on the day of expiry, nifty ends at 8550. But, I dont square off my position wat happens ?
What is the penalty ?
When does my blocked margin money get released ?
What is my profit ?
Please advise.
There is no penalty, your put expires worthless or at zero. The margin gets released end of the day, and you get to keep all the premium you had received when shorting the option. Enstire Rs 200 x 75 per lot is profit.
Hi Nithin, my question is that what happens in below scenario
I write/short UnionBank 115 PE option at price Rs 2 (lot size 4000) and the spot Union bank Value is Rs 126
On expiry day spot value for Union Bank is 110.8 , close price for 115PE option is Rs 3.85 and settled price is Rs 0
So how much loss I will make If I let expire my option writing. Or will I make profit as settled price is 0
Thanks in advance.
If you short 115PE and market closes at 110.8, you will be required to pay Rs 4.2 to the exchange. Since you had received Rs 2 when shorting, your net loss will be Rs 2.2. Check the options module on Varsity: http://zerodha.com/varsity/module/option-theory/
Thanks for replying..
In case instead of writing the 115PE, if I have bought the 115PE for Rs 2 and let it expire and on expiry day close price for 115PE option is Rs 3.85 and settled price is Rs 0. So how much profit I will make. Will it be same as loss calculation as 115-110.8 = Rs4.2. I understand that STT will be more If I let it expire. Just confused with close price shown as Rs 3.85 and settle price as 0.
If you sold the option contract at 3.85, then your profit will be 1.85. If you let it expire, then it’ll be worthless and your loss would be what you paid initially – 3.85.
STT will be more if you let it expire and the option expires “in the money”.
You would make a loss of Rs.2.20 (Rs.4.20 settlement price) minus (Rs.2.00 premium received) i.e (2.20*4000) loss on your position..
if I buy the Union Bank 115PE for Rs 2 and let it expire and on expiry day close price for 115PE option is Rs 3.85 and settled price is Rs 0. So how much profit I will make. On expiry day spot value for Union Bank is 110.8
Will it be same as loss calculation as 115-110.8 = Rs4.2. I understand that STT will be more If I let it expire.
All options are settled based on close of the underlying stock price. So if stock closes at 110.8, the puts will get settled at Rs 4.2. Since you have bought it at 2, you make a profit of Rs 2.2.
i bought options of ril at 0.8 now it is in 0.35 how much stt will be levied ?
You can use our brokerage calculator. STT will increase if you let the option expire after 3.30 pm. Do go through the post above.
Probably one of the best and simplest explained scenario about STT.
Thanks Nithin.
The price of 8650ce nifty , I didn’t square of , the spot price is 8670 n future may be 8666. Am confused. The call was closed at my buy price 8.40. On expiry day
Since you let the in the money options expire, the STT as explained in the post above would be much higher.
Nice theoretical information shared for traders, with practically high value. Keep it up.
Is there any rule that all otm option will expire worthless (0) at 3:30pm on expiry date?
And if so, we may sell otm options first @ expiry date & gain profit because it is expired worthless.. please explain
Yes and yes. Check this post.
Thank you sir..
Sir ,
you have shown the example of call by at 5800. He allowed the call to expire & he got trapped in the STT rule .But my question is slight different .If he would have sold it at 5780 index value before the expiry what would be his suffered loss without coming in this STT Trap
As long as the option expires in the money, you would end up paying much higher STT.
what if someone has sold in the money option…like for e.g. selling 1 lot of cairn 215 put at 8 and then what price will determine expiry cash price of cairn or future price of cairn for that month ? and explain what happens if cairn expires at 205 and what if i did not cover my short of 215 put at 8 ?
If you have short an option, you have already paid STT, so STT on expired options doesn’t affect you. If stock closes at 205, 215 put will close at 10, causing you a Rs 2 loss.
On Aug 25, 19400p last trading price is 95.5 whereas the settlement price is 77.8. Theoretically would i have a good profit if i would have shorted it in the last minute without covering and pocketed the difference of Rs 17.7 (95.5-77.8). Please clarify.
I have purchased banknifty put options 19800( 01sept expiry 2016) at rs 5, 8 lots but i did not square off
Now what will happen? how much stt should i pay?
How to escape from paying stt since I gave payout but amount is not yet credited to my account?
Do check your contract notes.
if i sold one call option of icici bank at rs 10/- and also sell one put option at rs 11/- of strike price 250/- why they charge margin for both sells as it will expire at any one side on expiry?
Check this: http://tradingqna.com/949/span-margin-for-a-hedged-postion
Hi Nithin,
Thanks for the very informative blog however i have one small question.
Isn’t STT is payable by the “Purchaser” in case of Sale of an option in securities, where option is exercised ?
I am copying below the excerpts from NSE Website.
STT Computation
As per the Finance Act 2004, and modified by Finance Act 2008 (18 of 2008) STT on the transactions executed on the Exchange shall be as under:
Sr.No. Taxable securities transaction New rate from Payable by
A B C D
a Sale of an option in securities 0.05 per cent Seller
b Sale of an option in securities, where option is exercised 0.125 per cent Purchaser
c Sale of a futures in securities 0.01 per cent Seller
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.
So if i let my ITM LONG CALL OPTION expire on expiration date then why i would need to pay the STT @ 0.125 %, as in settlement process i would be ” Seller”. Please clarify.
I would appreciate your views on this.
Thanks
Ashish
All options even though gets cash settled in India, for all theoretical purpose it is assumed that actual delivery of the underlying happens (that is why F&O trading is considered non speculative). So when the option expires in the money, it is assumed that the actual exchange of the underlying contract happens. Since this is a delivery trade, STT is applicable at delivery rates and on the entire contract value. STT rates dropped for delivery of equity from 0.125% to 0.1% a few years back, somehow govt forgot to reduce the 0.125% to 0.1% for options exercise.
i bought 300 put or 1700 shares at 0.6 and on the expiry day price is 328 and put expires at selling freeze than
1) how much extra i have to pay
and
what if put expires at 0
1) how much extra i have to pay ?
and
if on expiry date only one trade done at 0.05 in entire day and my trade didn’t got sold and no trades got executed entire day(or no buyer) than what will be the calculation ?
and
what if put price expires at 0.05 than
1) what extra amount i need to pay ?
If you bought 300 put and market expires at any price above 300, the option expires at 0. You lose all the money, since it expires worthless nothing to pay.
It doesn’t matter if trade happens or not, 300 put will be settled only if stock closes below 300 otherwise it is worthless.
Suggest you to go through the F&O module here: http://zerodha.com/varsity/
if 300 PUT expires worthless than do i need to pay anything extra on STT front ,,,because at the time of buying i bought STT,, so it share price expires at 328 of the lot of 1700 shares than how much extra i need to pay ? how will STT be calculated in that case, i bought 300 PUT at 0.60 paise
300 put will have 0 value if market closes at 328. No extra charges or anything at all, there won’t even be a contract note for this.
Hi,
Is there a way to get out of the STT if you into equity?
regards,
Shakti
Didn’t get what you are asking for.
Very important information. Will always keep this in mind while buying options.
Hi,
Have a doubt on the settlement price considered at the time of option expiry ?
Is it the last traded price or the closing price which is calculated as avg of the last half an hour before closing.
E.g. Axis bank Last traded price as on 29Sep (Expiry) is 541 but Closing Price is shown as 539.30.
I had sold a Put with 540 as strike. So at expiry, is the option in the money or out of the money.
Thanks
Closing price. Your option is in the money as its closing is 539.3
On the expiry day if it is 0 at closing, that would mean the option is worthless. All such worthless options are squared off automatically. do u charge brokerage for which has zero value
No we dont’
zerodha u rock, relieved from heavy brokerage for options, now i am fortunate and seeing bright future. thank you
Hello,
I have question on brokerage on options, some brokers charge 2.5% or 100-150/- per lot.
And some brokers charge only 20-30 Rs per trade any amount of transaction size.
My query is that how much broker can charge minimum brokerage for options. As there are also 15% service tax on brokerage.
There’s no minimum charge prescribed. Yes, 15% service tax is applicable on the brokerage.
Am I right that on expiry day, only ITM options has a value and all ATM and OTM options have Rs.0 value i.e. worthless? Pls reply.
Yep, right.
Hi Team,
I have bought 10 lots of 7500PE for Oct 2016 expiry @1.10 = (10*75*1.1)= Rs. 825
Since, the price was falling and to average the same out I bought another 20 lots @0.5=Rs. 750
Now my average Buy Price has become Rs. 0.7.
Assume, the premium for 7500 PE is currently trading @ 0.6.
Questions: What would happen if on the day of expiry the premium is trading at Rs 0.6 – and I didnt square the position off?
Gaurav, it is not sensible to buy such deep out of the money options. For 7500 PE Oct to make money, the nifty index has to drop below 7500 before expiry (2 days from now). If it doesn’t, the option will expire at 0.
Assuming Nifty does fall and options expire in the money, this will be considered as an exercised option. You will end up paying much higher STT as mentioned in the post above. So you should sell it in the market instead of letting it expire. Suggest you go go through the F&O module here: http://zerodha.com/varsity/
Hi Nitin,
Thanks for the reply. But, what if Nifty holds around 8500 on the day of expiry and i let all my open positions expire. Then would i still be required to pay higher STT?
Thanks,
Gaurav
sir, if i buy 100 share at 100 in cnc mode and sell 100 at 105 on same date. how many charge of sst ..
It is considered as intraday trade, STT is 0.0025% on selling side, or 0.0025% of 10500.
Hello Nitin,
Just a quick question I holding arvind 430 call and it expires at zero but I did not square off. Will I be charged an stt for the same.
rgds
rahul goel
No STT on options that expire worthless
Hi Nithin,
What happens to STT in case of Futures positions (if I let them expire ?)
For Ex:
I have Auropharma October Futures. I let them expire (did not sell it explicitly). Will I be charged STT when the position gets settled?
STT Futures will be MTM’ed against the settlement price. Since it’s not a trade and mere settlement, no STT will be levied.
Is there any url to refer to for “weekly” settlement price of BankNIfty for Options? How is the settlement price calculated in this case. Since there is no “weekly” future contract associated with it, how will the last half hour weighted average price of banknifty calculated?
Hi,
How about Deep in the money option, I bought Banknifty 19300 Call Option at 470, Bankifty close on expiry at 20000. and my Options price is 900/-. What would be my profit. Please share the calculator or method to calculate.
Thanks
All other charges are as per https://zerodha.com/brokerage-calculator. You will just have to add additional STT as mentioned in the post above. 0.125% of total contract value. In this case 0.125% of 40 * (19300 + 900).
I forgot to sell crude oil nov future on 18-11-2016. now its buying avg price was rs 3099 rs and today on 20-11-2016 i saw on q-zerodha that it get sold at 11:20 at rs 3111 (which i think is auto square) and some profit was there. but margin still blocked..please explain sir as i never on this kind of situation!!!..thnks
Hmm.. it should be released by now. Best to send such account specific queries to [email protected]
Hi Sir,
Please clarify my doubt.
I am a zerodha customer and do trade on option. I having doubt that suppose 8200 stike price put value is 150 and nifty is running at 8000. so this put is less than actual value. what will be the actule value on expiry day if nifty expired at 8000 and we don’t square off this option.
Please reply ASAP.
Thanks,
Sumit
8200 puts will close at Rs 200 if Nifty closes at 8000 on expiry day (8200 -8000). Suggest you to read http://zerodha.com/varsity/module/option-theory/
I have bought Sail 55ce Options…Last two days before expiry….There was no buyer…Until expiry what to do, that was not traded…How to exit?
Unfortunately no way to exit illqiuid option scrips.
What time options expire on last Thursday.
Is there it will expire at 3.15 pm or exact time.
After market closing.
Does exchange charge any charges (stt, transaction charges or stamp duty) on futures on expiry day, if i let the futures expire without actually squaring off ?
As per my knowledge, there are no charges. plz confirm.
No additional charge on futures if let expired.
Hi,
I have written (sold) 7600 PE for Dec ’16 series. Two possibilities:
1. Dec Nifty expires above 7600 (most likely:-)). That means, the option expires OTM and so worthless.
2. Dec Nifty expires below 7600 (unlikely, possible:-(). That means, the option expires ITM with some intrinsic value.
My understanding regarding the STT in the above two cases is as follows: When I wrote (sold) the option, I have already paid the STT on the premium amount. So, irrespective of where Nifty expires, I don’t have to pay any additional STT. I do not have to expressly square-off (buy) the position before expiry, as long as I am convinced that the Nifty will expire profitably for me. (Of course, I can always buy it before expiry, which is recommended, but that is a different matter.)
On expiry, the difference between sell premium and final premium will be credited to my trading account, and the margin amount blocked will be release.
Is this correct? Or is there any other implication depending on OTM / ITM expiry?
Might have already been answered in the above article, but too dumb to figure it out……
Please clarity.
Thanks in advance.
Best regards, with season’s Greetings and wishes for a great 2017.
S V Srinivasan.
100% correct 🙂
Additional STT gets levied only when the buyer of the option lets an ITM expire.
Wishing you too a Merry Christmas and a great new year to come.
Thanks, Venu.
One related query: If I let the option expire without expressly squaring it, will Zerodha still charge the brokerage of Rs. 20 (on the buy side, which is virtual in this case) and the associated service tax etc.?
Thanks again.
S V Srinivasan.
Yes, brokerage along with Service tax gets charged.
Hi Venu,
I was browsing through the chain Q&A above on this page. I found a statement from Mr. Nithin Kamath, on August 26 2015 in reply to a query from Mr. Satender, that Zerodha “does not charge any brokerage for contracts expiring worthless”.
Your feedback above is in contradiction to this. Could you please clarify?
Sincere thanks. With regards,
S V Srinivasan.
….. similar statement from Mr. Nithin Kamath also on October 1, 2016, in reply to a query from Mr. Shivanand Mole. Has something changed subsequently ?
Regards.
S V Srinivasan.
… may be, this depends on whether the option expires worthless (OTM) or expires with some intrinsic value (ITM) ? Would like to get this clarity. Kindly elaborate.
S V Srinivasan.
We charge if the option expires ITM. OTM expired contracts aren’t charged.
In case the theoretical value of the ITM option is 50 and the price on exchange is 45, then at expiry, if the seller lets the options expire, will he have to pay 50 or 45 to the option buyer?
Options get settled at theoretical price. So, 50 it’ll be in this case.
Dear Zerodha,
I bought M&M Finance 270 PE Dec 29th Expiry at 10.35 rs premium. I am bit worried and want to know
1. What if there are no buyers say when the underlying price of the stock is trading at 250 rs. If I don’t sell or can’t sell because there are no buyers ? Will zerodha exercise it on my behalf with some commission ? Please explain.
2. I understand if the underlying stock is trading above 259.65 ( 270- 10.35 ) and if I don’t exercise my option, then do I lost my entire premium ?
Thank you,
Br,
San
1. All options that trade in the Indian markets today are of Europeran type which means that they can only be exercised upon expiry, not prior to that. If the stock is trading at 250, your option has an intrinsic value of Rs.20/- If on expiry, it closes at 250, you’ll get a credit of Rs.20
2. As I mentioned in the above point, the option to exercise isn’t available. If the stock closes above 259.65, yes, you lose the premium.
what is the procedure how it is applicable h w it know it applicable can mentioned accordingly
Your question isn’t clear. Can you elaborate?
Hello Sir,
I bought Nifty option as below please let me know what will be the STT
Contract Buy Price QTY Date
Nifty 7900 Put 7.8 600 27/12/2016
Nifty 7900 Put 0.65 1950 27/12/2016
Total I have Nifty 7900 Put 2.33(avg price) 2550 27/12/2016
Today Nifty close at 8103 and nifty 7900 Put is almost 0
Please let me know what will be the STT
If Nifty has closed at 8103, 7900 Puts are OTM (Out of the money). They’re worthless and no STT gets levied.
Hello sir
I bought 20 lots Bank Nifty 18000 put options
& at the market clossing time 3.30 pm the put is OTM ( The price is 18028 ).
The Put price is Zero & there is no buyer.
But the provinal clossing is 30 point down. therefore now my put is ITM & more STT charged.
Please guide that what can I do in such conditions………..
You can square off your position atleast 30 mins in advance to avoid such a situation.
Hello Sir,
I am new to Options Trading. I have just started to understand the concepts. I have learned about Covered Call and Put. Low risk trading strategy is to sell Put option at 400 points down the current value and Call option at 400 points above the current value and allow it to expire. And as per this blog of yours the STT will not be charged since for Buy Back there is no STT.
I have a fundamental doubt on what will happen to the Call options that are 400 points down the current value during the expiry date. For example today the current value is 8,243.80 and the 7800 CE is trading at 476.
If I sold a lot of 7800 CE today and wait till the Expiry date, will the option expire to Zero or the Last Traded Price?
My apologies if the question is too naive
Deena, if today is the expiry day and Nifty closes today at 8200, 7800 CE will have a value of Rs 400. (8200-7800).
I suggest you go through the entire futures and options module here: http://zerodha.com/varsity/
Do all options expire at price 0 at expiry ? If we write options , will they all expire at 0 even if the underlying stock price does not touch the Strike price or approach the strike price ?
Yes. Suggest you to go through the options module here: http://zerodha.com/varsity/
Today morning i tried to day intraday trading for 200 shares of Indian bank . but the trade is rejected with the following reason. I have sufficient margin for the trade . what does that the reason indicate
MS:Blocked for nse_cm INDIANB-EQ MIS block type: ALL
We’ve unblocked Indian Bank for MIS trading. You’ll be able to place orders Friday onwards.
Hi nitin,
Hope your doing good.I needed 2 min chart time-frame in the tool.currently he have 1min,3min,5 min,10 min,15 min…….Can you please help in upgrading to the 2 min.As it help people like me who are daily income producers in stock market.
Hoping for the reply!!
Best Regards,
Raviprasad naik.
2 minute chart is currently available on Pi. I’ll pass on your feedback to the Kite team.
Thanks Nitihin for the information .. I had bought a single lot of NiftyJAN8600 CE (75 a lot @ .7 ) just to see what happens when an option expires .. this article popped up today and answered my questions. However i will let the option expire and see the transactions (as of now the single lot is In the money ) 🙂
If i buy Banknifty 19000CE @rs 120 on expiry day – 11:00am – (MIS) and hold it till 3:18pm & Banknifty is trading at 19500. then would i have to pay any excess STT charges?
If you don’t let it expire and if Bank nifty closes above 19000, then you’ll have to pay higher STT. If you square it off before 3.30, no additional STT.
Thanks, this article helps a lot. I do have a couple of related query:
1. Can anyone exercise options (in the money) prior to the expiry at EOD?
2. If someone has written options and on the expiry day, it is Out of the money – would the STT still be charged? In other words, are out of the money options exercised ?
Thanks,
Dilbert
1. All options that trade in the Indian markets are European type which means they can be exercised only upon expiry.
2. No, OTM expire worthless.
In May beginning you decide that shares in X Ltd. will rise over the next month or so. The current price is Rs 100 and you hope that the shares will be at Rs. 150 by the end of July. Give your comments if the Option is traded and if the option is not traded. Make assumptions.
Didn’t understand your query Shanaya.
Had a great loss due to STT!!! Learning with great price paid. 🙂
Such a wonderful blog, coming top on google search, worth reading!!!
Thanks “Nithin Kamath”.
Hello, Can You Provide any Sheet or Link for ITM, ATM and OTM value for all stocks.
Have you checked NSE option chain.
Hi, I have just a basic question. Let’s say Bank Nifty is trading at 20000 and I buy 1 lot of Bank Nifty 20300 strike price at 5 INR on the expiry day. Will I get profit or loss if I don’t make it squared off. Thanks.
Depends on where Banknifty closes on expiry day. You will make profit only if it closes above 20305. Suggest you to go through Varsity F&O module: http://zerodha.com/varsity/
Thank you for the article. definitely learnt a new stuff today.
Today I signed the petition on change.org hope that it will change one day.
Hi Team,
I bought 300 qnty of Nifty8500PE @18.9 rs — 5670 rs total.
Now its closes @ 12.15 rs and I haven’t square it off and date got expired.
My questions is:
1. is it possible to sell by next trade day, if price get increased.
2. what will be STT charges?
3. what is the better step to take future.
Thanks
1. If option has expired, you can’t sell.
2. STT if your option closes below 8500 will be as explained in post above. If Nifty closes above 8500 your option has no value.
3. hmm best to sell options on the exchange instead of holding it until close of expiry.
very informative article, thank you sir,
hiii all suppose i buy 20000 bank nifty put at 1 rs 100lot (100*40=4000 quanitty) with fixed brokerage of 30 rs (doesnt matter how many lot u buy) and if i sell it at 1.5 rs will i make any profit or loss will occur in this case . getting confusion in stt calcualtion so kindly guide me
use brokerage calculator
Hi,
I am short on USDINR FEB PUT option @67.75 @ INR 0.4/-
The expiry is 10 days away and the option will be in the money. To square off the premium is now @ 0.8 so it will be a big loss for me.
Is it safe to wait till expiry – I will receive the premium as I was short on it and then the difference on premium I pay. I am asking this because I feel I buy the option now to square off I will loose the premium. And the issue of this STT which I have also signed – doesn’t if affect my situation – being short?
Thnx
There is no STT on currency trading, so nothing you need to be worried about.
ok, thnx.
And what abt the option –
a. Should I let the option expire and then collect the premium and they pay off the difference or
b. Square it off before the maturity.
In the first option I would be better off as I get the premium money – or am I worng?
This is a market call you have to make. If you believe dollar will fall further, you square off your position, but if you feel it will go back up higher you hold. Holding till expiry would mean you taking a market risk until then. Suggest you to read up about options properly before starting active trading.
If I short out of money option and it remains out of money till expiry and if I do not cover the position till the end:
1. The option would expire worthless (exactly 0) and not at 0.05 (or the minimum tick level).
2. There will not be any extra STT applied in this case.
3. There will not be any brokerage on the second part of the trade, that is, covering the position.
4. The above 3 points will hold true even if I buy and out of money option and let it expire out of money.
Please confirm if my understanding in all the above 4 points is correct.
Are the above points correct?
Yep, all correct.
simple question… I sold 20100 PE option and 20400 CE option if last day its trading at 2:30@ 20200 is it need to square off or worthless? worthless automatically?
It depends where market closes. If it closes at 20200, then yeah worthless, nothing needs to be done.
STT, it appears is being charged due to a mistaken definition of Settlement Price.
From NSE Website
1. STT Levy
https://www.nseindia.com/products/content/derivatives/equities/sec_tranc_tax.htm
In case of final exercise of an option contract STT is levied on settlement price on the day of exercise if the option contract is in the money.
2. Settlement Price of options on exercise
https://www.nseindia.com/products/content/derivatives/equities/settlement_price.htm
Options Contracts on Index and Individual Securities
Final Exercise Settlement
Closing price of such underlying security (or index) on the last trading day of the options contract.
It is clear that the settlement price of options contracts is incorrect as above. As per the above definition the holders of ITM options contracts on expiry should be exercise settled with the closing price of the underlying (index or stock)!
May I suggest that this is taken up with NSE.
We have been doing whatever possible to make sure this is heard. Do check this petition.
I highly appreciate your efforts. Maybe, even this is an understatement. I missed mentioning this point earlier. I had also signed the petition earlier.
Kindly note that what I am saying now is NEW, very NEW, and with this and your great help this problem would be solved.
This issue is NOT due to Finance Ministry, but due to NSE’s mistaken definition of Settlement Price on Options expiry / exercise. I request you to please read this carefully.
2. Settlement Price of options on exercise
https://www.nseindia.com/products/content/derivatives/equities/settlement_price.htm
Options Contracts on Index and Individual Securities
Final Exercise Settlement
Closing price of such underlying security (or index) on the last trading day of the options contract.
Anyone would note that this is the settlement price of Futures and certainly not Options! If one goes by this definition, every ITM options holder should be settled with the closing price of the underlying on expiry / exercise!
In the example of the stt petition,
Options Contract Nifty 8600 CE
No. of held 3000 lots, or 225,000
Settlement Price –
Closing Price of the underlying 8602.75 (Nifty in this case)
Settlement Value 225,000 x 8602.75 = 193,56,18,750
That is a whopping 193 Crores! If one goes by the NSE definition of settlement price, NSE should pay this 193Cr to the options contract holder in this example ! So that proves that settlement price definition is incorrect.
How is the STT related to all this? STT is 0.125% of the settlement price! To be fair, NSE should correct this, and reimburse the excess STT collected due to its error.
I do hope this is clear now, and request your great help to kindly take it up with NSE and solve this anamoly.
STT is charged by government, don’t think NSE can do anything about this.
Sure, the govt takes the STT.
But the STT is being charged on the wrong amount. STT needs to be charged on the settlement price. The settlement price in the above example is only Rs.2.75 as that is what the amount that is settled. But the STT is charged on 8602.75!
Thanks to Zerodha for giving this valuable information.
Zerodha = will never make our accounts Zero but only Herodha.
I bought bank nifty 20100/PE for Feb but it is Rs.0.05 now.I did not sell but I let it expire.What to do now? Will I get charged now
Nifty closed above 20100, so this expires out of money, so no issues.
Nithin what happens if I sell a covered call on a stock that I own and the call option expires in the money? If I ask the broker to call away my stock instead of buying back the call option, will STT be charged on the sale of my stock?
In a covered call, you would have short the call option, and hence paid STT already. So there is no need for you to worry about paying higher STT. This above post is applicable only for buyer of options who hold on to in the money options on expiry.
Hi Nithin,
I don’t really get it. Suppose if call option is deep in the money? Say I am holding 25 lots of Bank nifty or 1000 qty. of say 21000 call and it closes at 21060. I have 60 points, but in market it will be at 35. Selling it at 35 or letting it expire, both are same right?
At what value option will be exercised? Is it at 60 or 35?
Thanks!
Yes the market would be factoring in the STT cost and will be trading at a discount to the theoretical value. Selling in the market at 35 or letting it expire at 60 will work out to be the same. What you need to ensure is when options are expiring just in the money, for example if Bank nifty closes at say 21005, your intrinsic value is only Rs 5, but STT cost is 20 points. This can cause much more losses than the option premium value.
Thanks Nithin. But, I am going to follow advise and sell it off and won’t take chance :-).
Hi Nitin,
Kindly share me with some tips on Stop loss for BTST & STBT.
Thank you
Hi Nithin,
What exact time of Weekly Bank Nifty Expiry. I mean, which price consider as expired, 1) LTP of Bank Nifty Spot at 3.30 PM, 2) Settlement price of Bank Nifty Spot at 3.30 PM, Or Other than 3.30 PM (like 3.00PM or 3.15PM)
2. Settlement price of Bank nifty spot.
If I sell an ITM option contract, the traded value closer to expiry will be less than the intrinsic value due to STT. In such a case, is it mandatory to square off the trade to gain on the STT? Can the option writer gain the value even if he lets the exchange do the settlement?
When you sell an option, you’ve already paid STT. The additional STT here is for buyers of options who let their options expire ITM.
Hi Venu,
You did not understand my question. I knew that STT is only while selling options. My question is at what price will the exchange settle the buy trade if I don’t square off. If the exchange does that at theoretical price based on the closing price of the underlying index, the writer would rather gain by squaring off the order himself rather than leaving it to the exchange.
Thanks
Yes, if you leave the position to expire, the settlement happens against the theoretical price of Nifty (computed based on last 30 minutes weighted average).
Hi Nithin,
If I sell an ITM option contract, the traded value closer to expiry will be less than the intrinsic value due to STT. In such a case, is it mandatory to square off the trade to gain on the STT? Can the option writer gain the value even if he lets the exchange do the settlement? If the exchange does that at theoretical price based on the closing price of the underlying index, the writer would rather gain by squaring off the order himself rather than leaving it to the exchange.
Thanks
Hi Zerodha,
Just to confirm,
suppose I have sold a Short Strangle on Infratel and want to carry on my position till it expires.
i dont have to pay that STT..
Right.?
Please let me know what I am missing in the below scenario.
Assume that I Short 1 lot of SBIN Feb 260 Call option at 15. On expiry day, the underlying Close price (both Spot and Future) is 270.45. If I do not manually square-off my position on SBIN Call option and let it expire (no extra STT since I have already paid STT while Shorting), then it should expire at 10.45 (270.45 – 260 = 10.45). However, when I see historical data on NSE website on expiry day, the Close price is 10.3 and Settlement price is 0.
Shouldn’t the final settlement price of this call option be exactly 10.45 (instead of 10.30)? At what price does the “in the money” option expire if not squared-off manually? I would assume that it should expire at Closing price of underlying minus Strike price of the option. However that doesn’t seem to happen in many cases.
Amit, all options are settled to underlying stock price close on expiry day. Closing on expiry day is last 30 mins average price. So the Last traded price and closing price could be different.
Thanks for the response. Just to ensure that I have understood it correctly…
It means that in the money option that gets exercised automatically based on underlying stock price close (and not the Closing price of the option – which weighted average of last 30 minutes of trade). Is this correct?
In the above example:
1. Short SBIN 260 CE at 15
2. Closing price of underlying on expiry – 270.45
3. Closing price of SBIN 260 CE on expiry (weighted average of last 30 minutes of trade) = 10.3
The profit (not considering brokerage or any other charges) would be 10.45 (270.45-260) and not 10.3 (which is Closing price of the option).
Is this correct?
Yep, correct
Hello Amit
Isn’t that the profilt is 15-10.45-Taxes and othere charges?
All the options that are in the money are automatically exercised on expiry day. Do they automatically get exercised at 3:20 pm by Zerodha or at 3:30 pm? Note that the value of option and underlying would be different at these two times.
In case the liquidity dries up for deep in the money options, I would prefer to have the option get exercised automatically at 3:30 pm rather than some random price at 3:20 pm. Please confirm.
Closing price of the day, so after 3.30pm and this is done by the exchange.
Thanks.
When the option is automatically exercised by the exchange on expiry day (after 3:30 pm), Zerodha does not charge any brokerage and there is no STT as well (for Short positions). Can you confirm if other charges like Transaction Charge, Service Tax, SEBI turnover charge and Stamp Duty applied in this case?
When you’ve short sold an option and don’t square it off by eod, the option gets assigned to you. Yes, all charges including Transaction charges are charged. You don’t pay STT since you would have already paid at the time of selling the option.
hi,
i sold rcom 35 ce @ 2.5…..what happens if rcom closes at rs 40 on the day of expiration
Rcom will close in the money. Your 35 CE will be worth Rs 5. But you will be charged STT at 0.125% of the contract value as explained above.
i have sold the rcom 35 ce……then also stt will be charged..?
also how much would be the loss?
STT will be charged like normal, 0.017% of premium value.
Kindly provide me the STT calculation incase I had not squared off ITM but allowed it to exercise
Situation: Purchased Bank Nifty 21600 PE 2000 units @ 0.40 paise (means investment Rs 800/-). At 3:22PM the price of 21600 PE is at 0.05 paise and Bank Nifty is at 21585, so I cannot close ITM as it is trading at 21585. At close of day 3:30 Bank Nifty closes at 21592 (so I am 8/- ITM). Kindly provide me the calculation of the STT in this case as I did not sell the 21600 PE ITM as it was at 0.05 paise.
0.125% of the contract value. So 0.125%x21592x2000 = 53980
Thanks for the reply Nithin. Crazy stuff this….. Even in ITM you loose money.
wow STT is only in india? The rate was set at 0.017% on all Futures and Options transactions. STT was originally introduced in 2004 by the then Finance Minister, P. Chidambaram to stop tax avoidance of capital gains tax. it is really the reason, i think they have decided that no option trader like retail option trader should earn from market so they have introduced stt ? why it is not in other countries? option buying is already risky due to time decay and other factors and if someone is trying very hard and get success in option buying stratagy so now he can earn huge profit like jackpot near expiry but they dont want to allow trader to earn from market ? angry……
Hi Nithin,
Thanks for the bunch of information. From reading this article, it appears that one should exercise the call or put option before expiry else there will be a huge implication of STT if you are ITM. MY question is what happens if i want to sell my ITM call option and I Place an order and it does not get executed till expiry? Do I need to pay the STT here? Is there a way that I can compulsorily sell my call option.
If you pending order does not get executed, you still run the risk of being charged high STT. You can place a market order to exit your option to ensure no positions are left open.
Thanks for this blog this is very useful information for both who are new and experience.
How does STT work in case of Equity Delivery? I am a new customer and only do Equity Delivery and very rarely IntraDay.
Works normally, nothing changes.
“…there is no STT, but since it is exercised, on the selling side you would pay an STT of Rs 562.5* much higher than Rs 3.75 which you would have paid if sold on the exchange instead of exercising.
*Rs 562.5 = 0.125% of ( (5900+100) x 50). Rs 562.5 would mean more than 7 points of movement on Nifty options, that is how high the impact of STT could be.”
Dear Sir,
In the above extract of article, I cannot understand the calculations, as it gives me Rs. 375/- of STT instead of 562.50. Please explain.
ah yeah.. it is 375, typo, fixing it.
Thank You Sir.
Dear Sir,
Sorry to write you again but as I read it again I think It is not the value Rs. 562.50 is wrong . Rather it is the LOT Size “50” which is “75” in case of Nifty is wrong.
Please Excuse If I am wrong.
Thanks.
Lot size was earlier 50, got changed to 75.
Thank You Sir.
What to do if I dont want zerodha to auto-square off my options position??
Trade using NRML and make sure you have 100% funds.
Any updates on the petition?
Sir,
I am new to option trading , and have basic doubt
I have bought Infy option call CE when share price was 950 of 500 units (1 lot)with preimum price as 11.5 , for target 960 (25-May) CE.
Now price after 1 day of stock is 945 but premium price is reduced to 8.5 Rs.
Now suppose
1) If I square off now whether I will loose all my money i.e 11.5* 500 which I initially paid , or I will loose only the difference between purchased price and last traded price * quantity .
Kapil,
You will only lose the difference between the buy price and the LTP
I am Zerodha client, I have Sell Nifty Option at the price RS.500 for 1 lot (75 quantity’s) at 8650CE.
1. If I did not buy back the option with in the expiry date. It will be automatically square off and buy my option contract or not .?
2. E.g.: if the Nifty close at 9350 on the expiry date.
=(9350 -8650)-500 * 75. My lose will be Rs.15,000 . or any other charges like STT will be applicable ?
Hi Mohammed,
You need to remember that if you are short/written options (sold first), you have already paid STT and it doesn’t matter if you buy the options on the exchange or hold them till expiry to square off, there is no STT on the buying side.
Thanks Akshay for you comment
Nitin,
When I had short sold an option and don’t square it off by EOD on an expiry day, I think the exchange closes the same with the closing price. But, the contract note I receive from Zerodha does not show the exchange order number and it shows something like 111111111. If the exchange closes the order, why is this happening?
Also, the contract note shows a different price than that of the closing price shown by the exchange. why?
About the exchange order number showing 111111. Don’t think any order number is used for exercising futures and options. Regarding the price at which the options were settled, it will be the average traded price of the last 15 minutes.
I have bought 1 lot of punjab national bank(3500) put option at the strike price of 140, paying .30 per share as premium price. Incase if it reaches 140 and i let it expire how much stt i would end paying.
At 140, the option will expire worthless, so no STT. If it goes 139.95 and lower, STT becomes 0.125% of 3500 x 139.95 around Rs 600.
Thank you, I thought if it expires below 140 i would end up paying 3500x139x0.125 =60812!!
In the money options, so only below 140 in case of puts.
Dear Nithin,
I need your help with this matter.Yesterday i shorted Nifty17May9000PE at 1.50 and i was planning to let
the option expire worthless as i was sure Nifty was not going to close below 9000 by 1530 hrs today and just as
i expected Nifty did not close below that level and as you may know it went beyond 9500.
But here comes the issue,the broker with whom i have an account called me up and told me that i need to square it off or else i wud be penalized for it now i wanna know how true is this as i look up through the posts above and notice that if the option is OTM then there is no value left in it and one can let it expire worthless so i just wanna know if my broker was right in telling me to cover my position which i did @ 10 paise towards the close.
Regards
Vijay
hmm.. your broker was being wrong. There is no penalty or impact letting an option expire. Btw the above post matters to only people who have bought options, makes no difference for people who are short. I am guessing it was done to generate brokerage of you.
Thanks so much Nithin…you are a gem.I can’t thank you enough in words.
Dear Mr Nitin Kamath,
i am big fan of yours!
i had one complain, without any information your team had been cut my position, no call no information i think this is unprofessional way did it. i am waiting for call that team will you me for arranging fund, but no information have before cuting my position.
Pawan, if it is because of an option expiring in the money, the STT impact can be huge as explained above. If we have squared off anything, you can be rest assured, we would have saved you a lot of money as STT.
Secondly
i had red your module that uploaded on zerodha site, can you pl advise any book that help to determine like stock price, movement of stock, expected price etc. hope you will do needful & oblige.
Have you gone through this: https://zerodha.com/varsity/
I bot Tata Motors 410 CE at 1Rs. When I wanted to sell this was rejected (RMS:Blocked for OPTSTK MKT nse_fo broker- ZERODHA Remarks: Option Stock market orders are not allowed block type: ALL). Then I had to leave it to expire. What is the tax implication on this?
One question today if I buy nifty 10000 PE @500 and at expiry if nifty closed 9300 then what will I get profit or loss and if yes how much
You will get back 700 for the 500 u paid. But around 12 points will be STT, so net will be around 185 points of profit.
Hi Nithin,
If I am writing options first(selling first) of lot size 20000 at Rs 1 and want to buy/square off my position before or on expiry day and there are no sellers at the time of buying
— What will happen to my position?
— What will happen to the margin held by securities.
— Will it get exercised to some price?
Thanks
Vishal
If your option is in the money on expiry, the buyer automaticaly exercises and whatever the option is in the money will be debited from your account.
Margin gets released end of day after the option is paid to the buyer.
Yep, closing price of the underlying stock.
sir,
say , banknifty is trading around 23480 and today is expiry . Now , on this expiry day at 2:00 PM
premium is 7 of strike price 23500 . say i have 10 lot and now nifty expires at 23510 now i have to pay sst
i. (0.125% of (23500+7)*40) = 1175.35 and for 10 lots 1175.35*10 = 11753.5 i.e individualy
or
ii. (0.125% of (23500+70)*40 =1178.5 i.e in combined way
my question is in which way stt will calculated on exercising on i way or ii way
23510*40*0.125% = 11755.
Sir can u make autosqaure off system for option as well , which will squareoff before expiry
Hmm.. not everyone will want it.
Hello there today is Bank Nifty expiry, and the Bank Nifty Spot is 23394 and Futures is 23382,
I have 23300PE trading @ 0.25,
23200PE trading @ 0.1
23100PE trading @ 0.1
and 23700CE trading @ 0.05
23600CE trading @ 0.05,
23500CE trading @ 0.25
If I sold any of the above options and let it expire worthless and profit whatever small profit is to be gained.
Will there be any higher STT that is charged or will it be charged @ the regular rates.
Regards
Shankar
If you are shorting an option, you have already paid STT while selling so nothing to worry about.
Hi Sir,
i am getting problem for placing stop loss on options ( intraday and normal), whenever i put stoploss order for this, my order get exited at same time. Is there any solution for this.
I am guessing you are entering the trigger wrong. Check thisvideo: https://www.youtube.com/playlist?list=PLkxTRam6E2V-okv6gwQlt6dLTsn0v6CD1
Hi Nithin,
“Rs 375 = 0.125% of ( (5900+100) x 50). Rs 375 would mean more than 7 points of movement on Nifty options, that is how high the impact of STT could be. (assuming nifty lot size of 50)”
As u mentioned above, Rs.375 STT will be paid if options get excecised.
Whether It is options or Futures?
Options and that too only buy option positions.
Hi,
I have purchased RECLTD CALL Option 200 for 29-Jun-2016 expiry. But because of some reasons, I couldn’t sell my position on expiry date. Now what will happen with my positions ???
I can see still position is reflecting in my position list. I hope ideally it should automatically squared off at the end of expiry. Please suggest what to do with this open position now and what charges will be applicable ??
Thanks in advance !!
Yea it will get exercised if in the money if not expires worthless. Check out the contract note for the charges.
Very good piece of information Nithin. Really helpful for people trading in Options. I recently read an article where a person lost 24 lakhs in 5 minutes. It’s really unfair on the part of the government to levy tax 5 times more than what a person has earned. I agree that it is a good practice to close the ITM position before 3:30 PM. But there might be some emergency situation or any network issue or any issue with the tool itself. In such cases, people may not be able to close. The government should revise the STT tax and should not burden common man.
I think someone should urge the government regarding this. Nithin, why don’t you take the initiative 🙂
Hello,
(Ex: Option Index – BankNifty – 13July2017-23700-CE @ 65 Rs).
If I do option writing in out of money (OTM), on expiry date, the premium is sink to almost zero or worthless for these OTM. I buy on the expiry date very closed to zero. Is this a profit way?. If yes, then how much money is required for option writing for 1 lot for this above example.
Regards,
Vinayaka
Check this post.
EXCESS STT ONLY APPLICABLE FOR LAST THURSDAY…AM I RIGHT….THEN WHY YOU SHOWS MESSAGE TODAY(13.72017)
There is bank nifty weekly options which expire every thursday of the week.
Hi Sir,
Aren’t options settled at Rs. 0 after the expiry, if we look at NSE historical data?
Yes, if they are out of the money. If they are in the money, they get settled at whatever the option is in the money.
Finally the day has arrived and I’m also in same situation where everyone needs clarity.
Today, I don’t know how many has observed but it was very killing day of traders.
Coming straight to point, it was weekly Bank Nifty Expiry. Every time CE/PE price is ITM + Time premium discounted with probable STT. Today it was day of something surprise…BankNifty spot and future was hovering near 23875/900. 23900 CE showing only risk premium being OFM whereas to everyone surprise 23900 PE being ITM was showing less than Its even IV and less than CE and even less than in the value money forget time value of money premium.
23900 PE was brought to 0.05 very early without actually discovering market price and everyone who has purchased 23900 PE after 2.45PM they have made hell of money.
You are wrong Mayur. Everyone who bought 23900 PE would have lost loads of money. The put option expired at 23888. The STT on this option was 30 points, intrinsic value of 12 points. So 18 points extra STT.
Yes Correct. It was writing mistake at last sentence.
Nitin sir, i am facing same issue with angel..i bought put options and shocked with contract notes received i have to pay huge amount and unable to pay such amount its my beyond my capacity to pay such charges where as broker demanding money. sir please guide what is to be done this case. sir expecting you prompt reply. thank you.
Hmm.. unfortunately nothing much can be done. Angel has a right to ask you to make good of those losses.
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Hi,
I have one query here.
If I sold 1 lot of call option and till expiry also it remains out of the money then on expiry day if there is no seller and because of that I couldn’t close my position then in that case how it will be settled ??
If it is out of the money, it expires worthless. No settlement as it is 0.
I have a questions, If I write a options at say .50 and let it expire then will I get the premium? Say I write of 20 lot of bank Nifty.. so will I get 400 rupees as premium or is there any other calculations
Yes, you will get the entire amount. For the short trade there is brokerage and taxes applicable. But since it expires worthless no costs on the expired options.
I had bought ITM money call option on Jul 27, and after the purchase the value almost reached zero. My question is, if the contract value reaches zero before expiry, is it assumed as sold for 0?
If option expires out of the money then it is considered 0. So if closing price is above the strike in case of calls and below in case of puts.
Hi Zerodha,
Please explain the reverse trade for Nifty.
I mean how much margin i should have and everything.
Thank you
Nishant shah
Reverse trade? what is that? Suggest you to go through the F&O module here: https://zerodha.com/varsity/
I am new in market
One question bank Nifty index is at 24700 and bank Nifty future August at 24800 so for option trading which will be considered?
On expiry day it is the underlying index/stock. Do go through the F&O module: https://zerodha.com/varsity/
Great article, and to the point… Keep the good work!
This is exactly what i was looking for!!!! what are the odds
I BUY CALL 24200 BANK NIFTY PREMIUM IS RS. 4
BUT I AM NOT SQ.UP AFTER CLOSING MARKET .
AND CLOSING IS 2.45 AND BANK NIFTY INDEX CASH SEGMENT 24217 AND BANK NIFTY FUTURE INDEX CLOSE AT 24363.80 .
NOW WHAT’S CHARGES OR PENALTY GIVEN ME BY EXCHANGE AND HOW TO COUNT THIS METHOD .
HOPE SO YOU REPLY ME URGENTLY
Bank nifty 24200 puts will have no value if market closed at 24363. So no penalty and all, your options expires at 0.
sir, I have a quation, on 24th august 2017 expiry
1) If i buy call option of 24300 ce and can’t square of option position on expiry day. its ltp is Rs. 0.10 and settlement price is 13.70. than in which price my option will be sold?
2) In above mention situation banknifty spot price is close at 24274.20 and bank nifty future close (ltp) is 24330.00
In this situation my 24300 ce will be in the money or not? If it in the money than in which price it will sold by exchange and what is stt payable on that as per new circular> plz reply me thanks
1. 13.7, but STT on this will be 30 points.
2. No it will not be in the money.
Sir,
I would like to know more about option exercise. About STT i know the differences (normal and excercise rate). But what about transaction charges and taxable value? is calculate on the basis of underlying asset or option price? I have exercised bank nifty last week, they have charged STT rs 1214 ( that i can understand that [(24274*40)*0.125). but they charged transaction charges rs 729 & taxable valkue rs 778. when i ask the broker they said that in option exercise everything is calculate on the basis of underlying asset (that is 24274*40) not on the basis of premium. Is it true?
Transaction charges is based on premium itself.
Out of the money call put premium always zero on expiry?
Yes
So if we are not square of the selling position in call and option on expiry day then what happen…