@zerodhaonline @Nithin0dha now short straddle and short strangle will not have that much importance as option put and call sold for straddle or strangle have to buy back… am I right…
Please clarify I am confused…
Firstly, this is still like a discussion paper. There is not guarantee that it will see light of day. If it does, all option strategies will have to be squared off in the market before market closing on expiry. So yeah it might mean a little lesser yield on the trade. Shouldn’t matter much.
You are right , but my view was based on Banning of P-Notes and listing of SGX Nifty in Sinagapore,
Government done the right thing banning P-Notes, but FIIs found alternate route to trade in SGX Nifty
Indian Bourses made a mistake allowing SGX Nifty in Sinagapore, Now , to damage further SEBI is going to change the derivative settlement. In my opinion all the FIIS will shift to SGX Singapore there FIIs have timing advantage also.
I was trading commodity futures on NCDX, making good money, then suddenly Government changed the rules , FIIs left and see the results, and what happened to NCDX. i too left trading in commodities.
To add further here is the link
Thanks… now if you don’t mind i want to ask below… please do not reply if you think so.
While let the strategy expire as it is if it works … broker donot get benefitted because there is no buying transaction.
You have supported considering there will be a square off of this type of strategy…
If earning money was the driving reason behind Zerodha or everything I do personally, hmm… we would be just like another broker :). Btw, there is a brokerage charged on exercised options, so this wouldn’t make any difference to us.
I have been a trader and I know different ways in which derivatives can be misused by people with deep pockets. Anything that can even out the playing field is good for everyone.
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Almost on every exchange in the world stock derivatives (not index) are physically settled. If anything FIIs will like this even more. A lot of them take part in covered calls (writing calls on their holdings). Now they will be able to deliver on the exchange platform itself.
I think it is too early to debate on all of this. Need to see if this is actually put in play, and if yes in what way.
It’s really great that CEO is directly replying and ofcourse immediately…
Thanks again and I hope Zerodha will take and support everything considering retail investors/traders…
Thanks again…
Thank you for taking my view positively, FIIS are usually long term investors, and covered calls are designed to take interest income like house rent income, if derivatives settled in cash every month FIIs loose interest. i am sensing, fearing with my experiences , over the period of time , what happened to commodity trading in the past , will happen to Stock/Index derivatives, we retail traders/Investors end up buying only either stocks or Mutual funds and total exit from the derivative trading
One more thing… how index options will get settled, if someone hold till expiry… and donot square off. Any idea…
My guess - technology (Online trading, encryption n cryptos) will again bomb govts’ plan for ever higher taxes in the name of regulation.
Traders will move to CFDs on european / singapore markets with help of cryptocurrencies and encrypted trading systems.
Better zerodha moves rarly to tie up with some top class cfd brokers.
Index Futures and Options will remain cash settled and this is where the majority of the activity is anyways. Making physical settlement compulsory is good for stock investors as they may be able to use their existing holdings and hedge their risks by writing options. This was the original purpose of introducing options contracts on stocks, but it has moved on to speculation instead of just hedging.
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One quick question,Margin required to trade an SBI future (lot size 3000) is approximately 1.2lkhs. where as if the same has to be taken as a delivery during the expiry I need to have around 8lkhs (assuming 270*3000).
Trading in EQ or FNO is speculation,but I choose FNO because i get the margin benefit over EQ.
I am a small trader,even though I have a demat probably will never be able to invest this kind of capital.What happens to traders like me? Should we stop trading in FNO then? Will Zerodha give me an option to take the delivery on margin funding?
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You sqoff current month future or option and initiate next month contract before expiry of current month contract.
Hi,
I trade in FNO and pay my taxes, now if the the options instead of getting settled, the trader will get delivery. In this case, how do I show in my tax book?
Delivery is only if you don’t square off before expiry
Else it works like it does now
Ideally u should do that, unless you specifically want delivery of stock
Else you’ll need 5L amount or whatever is the value of equity, in ur acc, to receive actual delivery of stock
This SLB thing looks similar to US sub-prime mortgage market. First casualty of the US sub-prime market crisis was Lehman brothers!
In India on any crisis, every retail trader might become future VijayMallyas but escaping to Thailand/////
Better Sebi also ban Thailand travel fr retail traders frm now onwards…
Taking delivery is not the only issue here.
Huge upfront margin requirement for both buyer/seller(in order to manage the risk of non delivery/not taking delivery) .
Seller additionally need to shell out dividend to stock lender( if paid by co during trading period),
Interest on the borrowed stocks
Additional transaction .Exch transaction charges /DP charge will increase a lot.
More taxes for government in case of delivery.
So the idea is everybody want to feast on the trader. That is not going to end well.
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@Shubh if this comes through, you can always sell a contract instead of deciding to exercise. So sell on the market instead of letting it stay in the account.
Hey Nithin,
I can definitely square of the future contract for this month and take the next month contract.
But the issue is when I trade in options and futures of the same underline together to hedge my risk.
Choosing not to exercise would have given me that benefit.
Only two days back we discussed about how new trading opportunities will emerge with changing in STT on exercised options changing from this expiry.
If STT benefit was given to option traders,so I will choose not to exercise the options during expiry and roll over the future contract.
In that case what happens? When do i need to bring in the funds to take a delivery of the Stocks?
Firstly this is just a discussion paper, we have no clue if it will be implemented and if it is how it will be. Like in commodity markets, there is compulsory delivery period, maybe something like that will come through for equity as well. So if people don’t close out positions on a particular day, the next day onwards they can be assigned delivery. Also to hold positions in the compulsory delivery period, margins are made much higher. If physical delivery is assigned, then the person is required to bring in entire money.
What was done about STT on exercised options was more like a quick fix. Don’t think you can mix both these.