# Hella confused with option trading in US market
**URL:** https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123
**Category:** Trading
**Created:** [May 16, 2026, 4:47pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123 "2026-05-16T16:47:38Z")
**Posts on this page:** 20
**Page:** 1
### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [May 16, 2026, 4:47pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/1 "2026-05-16T16:47:38Z")
I am an Indian tax resident and I am looking to trade US stock options. However, there is no clarity on whether Indian residents are actually allowed to trade in US stock options. I spoke to one of the brokers that provides this facility, and this is what they stated regarding it.
also found an RBI notification, last updated in Feb 2019, which mentions that derivative undertakings are allowed:
[https://m.rbi.org.in//Scripts/BS\_FemaNotifications.aspx?Id=155#sch1](https://m.rbi.org.in//Scripts/BS_FemaNotifications.aspx?Id=155#sch1)
So, are Indian tax residents actually allowed to trade US stock options or not? And is there any official source or authority from which I can get a definitive answer on this matter?
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [May 16, 2026, 5:38pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/2 "2026-05-16T17:38:05Z")
> [@Walker](#):
>
> which mentions that derivative undertakings are allowed:
> [Reserve Bank of India - Foreign Exchange Management Act Notification](https://m.rbi.org.in//Scripts/BS_FemaNotifications.aspx?Id=155#sch1)
The ambiguity is probably on purpose.
One possible explanation is it is not permitted under LRS, but permitted outside of it nonetheless.
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### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [May 16, 2026, 7:01pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/3 "2026-05-16T19:01:44Z")
what do you mean by not permitted under LRS and permitted outside
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [May 16, 2026, 9:14pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/4 "2026-05-16T21:14:24Z")
Excerpts from AI:
> The Foreign Exchange Management Act (FEMA) governs all foreign exchange transactions in India, while the Liberalised Remittance Scheme (LRS) is a specific provision under FEMA that allows residents to remit up to USD 250,000 per financial year for certain permissible transactions. Transactions outside the LRS may require prior approval from the Reserve Bank of India (RBI)
> For transactions that exceed the LRS limit or are not covered under it, individuals must seek prior approval from the RBI. These may include
> Direct investments in foreign businesses
> Transfers for real estate purchases
> Any other capital account transactions not permitted under LRS
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### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [May 17, 2026, 11:22am UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/5 "2026-05-17T11:22:06Z")
As posted in the screenshot under LRS only cash account is allowed no margin account, and buying options doesn’t require any margin, so can it be interpreted that buying options is permitted…?
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [May 17, 2026, 12:02pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/6 "2026-05-17T12:02:02Z")
> [@SLBM - next passive income stream for small investors?](https://tradingqna.com/t/slbm-next-passive-income-stream-for-small-investors/188415/15):
>
> @siva I see margin trading is banned as per RBI. But you can buy options without margin with full cash. So that shouldn’t be banned. Right?
> [@SLBM - next passive income stream for small investors?](https://tradingqna.com/t/slbm-next-passive-income-stream-for-small-investors/188415/17):
>
> Options not allowed, atleast we won’t be offering, people interpret in many ways though.
- Master Direction - Liberalised Remittance Scheme (LRS) (Updated as on September 06, 2024) [Master Directions - Reserve Bank of India](https://rbi.org.in//Scripts/BS_ViewMasDirections.aspx?id=10192)
> 1. All other transactions which are otherwise not permissible under FEMA _ **AND** _ those in the nature of remittance for margins or margin calls to overseas exchanges/ overseas counterparty are not allowed under the Scheme.
Margin is not exactly defined in the LRS master direction. But somewhere in other directions it says the below. This may or may not be applicable definition:
- Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020 [Notifications - Reserve Bank of India](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12097&Mode=0)
> 1. iv) “Margin” means the collateral that the parties to a derivative contract post with or collect from each other (whether directly or through a third party) to cover some or all of the credit risk that the provider of the collateral poses for the receiver of the collateral;
@Walker Which broke offered this though?
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### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [May 17, 2026, 12:16pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/7 "2026-05-17T12:16:24Z")
> [@BB789](#):
>
> Which broke offered this though?
TastyTrade
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### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [May 17, 2026, 12:17pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/8 "2026-05-17T12:17:26Z")
I asked Interactive Brokers they outright said that options not allowed for Indian users and still waiting for response from Charles Schwab
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### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [May 17, 2026, 12:20pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/9 "2026-05-17T12:20:26Z")
> [@BB789](#):
>
> > 1. iv) “Margin” means the collateral that the parties to a derivative contract post with or collect from each other (whether directly or through a third party) to cover some or all of the credit risk that the provider of the collateral poses for the receiver of the collateral;
if we go by this then options by definition doesn’t fit into this, options are right to buy number of stocks at a certain price at a certain date
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [May 17, 2026, 1:14pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/10 "2026-05-17T13:14:57Z")
> [@Walker](#):
>
> options by definition doesn’t fit into this
How so? Couldn’t option buying be interpreted as being “party to a derivative contract that you post collateral with”?
But would it definitely fit selling covered call? “All of credit risk” would imply so.
Again It’s probably ambiguous on purpose so that government can target anyone for other reasons.
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### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [May 17, 2026, 2:30pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/11 "2026-05-17T14:30:28Z")
> [@BB789](#):
>
> Again It’s probably ambiguous on purpose so that government can target anyone for other reasons.
yeah I agree…
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### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [May 17, 2026, 2:31pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/12 "2026-05-17T14:31:23Z")
> [@SLBM - next passive income stream for small investors?](https://tradingqna.com/t/slbm-next-passive-income-stream-for-small-investors/188415/15):
>
> I see margin trading is banned as per RBI. But you can buy options without margin with full cash. So that shouldn’t be banned. Right?
you asked this question in that thread last year so did you trade options in US markets with any broker…?
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [May 17, 2026, 3:27pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/13 "2026-05-17T15:27:57Z")
No. You need to emigrate to have such freedoms. Not making enough to have such options. Also RBI/Govt may even come down on LRS.
> [@Global Investing](https://tradingqna.com/t/global-investing/186529/116):
>
> For now… yes. What happens when NIFTY hits 18k? SEBI/RBI:“Retailers need saving…They’ll lose money in foreign markets. We need to stop this…” Saviors of retail may put a stop to this. Zerodha might be too late. News reports government mulling LRS [https://x.com/NDTVProfitIndia/status/2054830722767085908](https://x.com/NDTVProfitIndia/status/2054830722767085908)
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### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [May 17, 2026, 4:06pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/14 "2026-05-17T16:06:31Z")
Yeah they may very soon as US investing is getting very popular among retail traders nowadays
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### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [May 18, 2026, 6:29pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/15 "2026-05-18T18:29:42Z")
@BB789 I just a call from Charles Schwab and they are allowing both margin and cash account and unrestricted access to every tradable instrument for Indian tax resident 😂
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [May 19, 2026, 2:27am UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/16 "2026-05-19T02:27:39Z")
Makes sense. They don’t have a branch or business in India unlike IB. They don’t have to deal with RBI. But rules apply to residents anyway. The onus of compliance rests on you.
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### Author:  [@LaSnak](https://tradingqna.com/u/LaSnak)
#### Post date: [May 24, 2026, 8:36am UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/17 "2026-05-24T08:36:58Z")
Technically it’s a FEMA LRS limitation so you could theoretically send the money for investment and then decide to do F&O. However, in practice Indian brokers for US investing don’t offer F&O so somewhat moot point
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### Author:  [@Walker](https://tradingqna.com/u/Walker)
#### Post date: [September 26, 2026, 9:02pm UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/18 "2026-09-26T21:02:24Z")
@BB789 Binance has launched US stock options is it somehow different than going thorugh a broker like IB, though they say the underlying is the actual stock with even the option to physically settle it. But the mode of buying is USDC
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [September 27, 2026, 2:03am UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/19 "2026-09-27T02:03:35Z")
Interesting. If you aren’t doing LRS, it does not come under FEMA I guess and therefore you can buy options?
Maybe @Quicko can confirm or offer more details.
Edit: Buying foreign assets without LRS also triggers FEMA, I think. Not sure, only FEMA experts/ precedents can help
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### Author:  [@cvs](https://tradingqna.com/u/cvs)
#### Post date: [September 27, 2026, 7:40am UTC](https://tradingqna.com/t/hella-confused-with-option-trading-in-us-market/194123/20 "2026-09-27T07:40:01Z")
> [@LaSnak](#):
>
> theoretically send the money for investment and then decide to do F&O
Having done that,
in future when the “facts of the case” clearly show that
a. outward remittance was executed as a resident of India
b. and subsequently the funds were used for trading in foreign derivatives
how do you plan to defend/prove your “intent” being otherwise ?
> 💸 **A**. Next, add the drag of few lakh INR
> that any half-decent tax-advocate would charge you to defend your position.
_(Sure, since being scrutinised is not a guaranteed occurrence,
let us assign a small non-zero probability of this scenario occurring in future.)_
* * *
Next,
> [@Walker](#):
>
> But the mode of buying is USDC
Now, in addition to the uncertainties involved with trading in foreign derivatives as a resident Indian,
one also exposes oneself to complexities involved in VDA (Virtual Digital Assets) compliance
> 💸 **B**. To begin with, a drag of 1% TDS on VDA (USDC).
* * *
Also,
> [@BB789](#):
>
> Buying foreign assets without LRS also triggers FEMA
Agreed. LRS is just one aspect under FEMA.
FEMA already prohibits residents from gaining exposure to foreign derivatives
unless to hedge one’s risk due to another permitted foreign investment.
> **3.** **Prohibition :-**
> Save as otherwise provided in these Regulations, no person in India shall enter into a foreign exchange derivative contract without the prior permission of the Reserve Bank.
> **4.** **Permission to a person resident in India to enter into a Foreign Exchange Derivative contract :-**
> A person resident in India may enter into a foreign exchange derivative contract in accordance with provisions contained in [Schedule I](https://www.rbi.org.in/SCRIPTS/BS_FemaNotifications.aspx?Id=179#sch1), to hedge an exposure to risk in respect of a transaction permissible under the Act, or rules or regulations or directions or orders made or issued thereunder.
Source: [FEMA (Foreign Exchange Derivatives Contracts) Regulations, 2000](https://www.rbi.org.in/SCRIPTS/BS_FemaNotifications.aspx?Id=179) and [latest notification dated 2020](https://www.rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=12097).
* * *
**Q**. At what expected volumes of investment (including any necessary exposure to the underlying)
and net rate-of-returns,
do foreign derivatives makes financial sense (i.e. a significant enough positive EV)
given the above uncertainties/risks involved and the costs associated with them? 🤔