Avoid trying to trade offshore F&O from India "Door ke dhol Suhane"

#1

Hi!
There seems to be lot of interest in trading in overseas markets like US on this forum.
Please avoid trying to arrange setup like gifting money to NRI and other sorts of solutions.
Consider the following points-
Expensive brokerage - TD Ameritrade, one the most well know brokerages charges $5 per order so $10 per trade and if you trade futures and options add $2.25 per contract. SO if you trade a 10 lot options trade. The expenses would be $5 + $2.25 x 10 = 27.5 x 2 = $55. So around $55 x 70 = Rs. 3850 for one single trade. Compared to Rs.40 with Zerodha + around 1500 per crore other charges. = 1540. per crore. example for 12 lot Nifty is worth around a crore.
US Taxation = U.S is hands downs the most complex taxation system in the world, and filling as to be done through physical paper and it involves 5-6 different forms and CPA costs Rs. 80k.
Not like India where you can easily get a Nice CA to help for Rs.10k and there is one single form that too you can efile.
Other factors- Also there are other regulatory risks associated like RBI.
And they money will have to be Wire transferred which in itself is not a simple and quick process and involves correspondent banks. And takes upto a week for funds to get credited. Also there is exchange rate fluctuations and other remittance charges upto 2rs. per dollar every side. So if you get and receive $10k it would around rs.40k round trip just to move money.
Unlike our beloved RTGS and NEFT, also IMPS.

So the conclusion is friends, avoid “Shiny Object Syndrome” and stick with Indian Markets, even though the margins maybe high they are for your own good, if you are a profitable trader, margins should not be a worry, may not be the case if you want to gamble on heavy leverage.

Saare Jahan se Accha Hindustan Hamara, Contribute to our own beloved nation and make it financially 10 times better than any other overseas market.

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Is it legal to trade stocks in USA's stock exchanges as an Indian citizen?
#2

More than the logicality, It has got to do with the emotions attached, with whom you want to associate with.

When the family asks you what you do, is it not much of a weightage, when you can say, you trade stocks in the New York Stock Exchange.

#3

When one can make profits here , why even bother to do nasdaq or ftse…?

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#4

While all of this maybe true you probably understand that along with wire procedure, big expensive taxes and everything else like CPA it’s just more profitable overall to be able to trade in US markets. It’s biggest market in the world. But yes, local shouldn’t be ignored.

#5

I don’t agree with the some of the facts.

  1. The brokerage is per contract which is circa $2 per contract. Unlike NSE, the contract value is much higher. So we should not compare it with what we get in India.
  2. Liquidity - for the derivative traders, liquidity is key. US offers a lot of liquidity which mean you can easily buy/sell contracts. Of course, the spread is very low.
  3. FX - RBI does allow transfer of funds legitimately. I am not clear how brokers like IB could exchange the INR to USD so that remittance restrictions are not to be followed.
  4. Tax - w8-ben can be file with US Tax authority which means we pay no tax to US except in the case of dividends. This is because India has a tax treaty with US.
  5. Margin - Relatively speaking, it is lower than the India margin requirements. if you are a option seller, you can get more premium thus more return to your invested money.
  6. Longer contracts - you can get into longer duration contracts like 1,2, years. Warren Buffet sells long term puts to gain on the theta decay. So its worth considering.

But the cons are

  1. US brokers does not allow Indian residents to open a margin account. So I am not clear whether the same amount of margin is required for us.
  2. India clients will not be able to trade in all kind of positions like naked option sells. Worth investigating…
  3. India tax consultants lack the basic knowledge of how to deal with this kind of income/gain. CAs - you could up skill yourself to gain some market share :slight_smile:

anything else?

#6

I too thought the same but in a different way , let my losses go to my fellow indians.

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#7

India tax consultants lack the basic knowledge of how to deal with this kind of income/gain. CAs - you could up skill yourself to gain some market share - but honestly how do you really pay taxes in india by working with them ? I am totally lost here anyway.