Option Premium and Settlement: Doubt

General
1

Hi All,

I have some queries.

Query–1

If we carry forward an Option trade, at the EOD (some profit/loss is generated depending on the premium at which the Option is trading)

Next day, in the morning after 7:30 A.M., the values change-- what exactly happens in terms of process?

Query–2

If the option is a weekly option and the expiry is Thursday, and there is daily fluctuation in P and L (Option premium* lot) until Thursday and we didn’t exit the option, no charges will be levied right? (inclusive of Brokerage)

If we only exited the option in either Profit or Loss, the brokerage charges will be levied right?

Query-3

What are the best indicator for predicting Option premium movement (Both technical among others )

Regards

2

Exchange uses weighted average price of last 30 minutes of trading to determine the final closing price/settlement price for the day, this can vary from LTP (Last Traded Price).

On Kite, around the next day morning. The settlement price will be updated instead of LTP once we receive the BHAVCOPY (daily report with OHLC data, traded value, qty, OI etc.) from NSE.

Due to this, the LTP value for F&O contracts changes to the settlement price instead of the last traded price.

This support article explains it in detail.

The day you take the position, brokerage and charges for that leg Long/Short will be charged at the EOD.

Now if you haven’t squared-off your position before expiry, then if the position expires OTM, it’ll expire worthless and no charges will be applicable.

If the position expires ITM, brokerage will be applicable and if it is Long Option position, exchange too charges STT at 0.125% on the intrinsic value.

You can check out this post for more details: What happens if I don't square off my positions in options? - #2 by ShubhS9

3

Thanks sir.

If one’s turnover for FY 2020-2021 ( July 2020- Dec 2020) (F and Options turnover exceeds the prescribed limit and necessitates an audit, can this audit be filed in the current financial year ? ( 2021-2022) (Last year , there was pandemic wave)

Can you advise sir?

4

@Quicko can you.

5

Hi @ShubhS9

If turnover in F&O exceeds the prescribed limit of turnover u/s 44AB then tax payer has to mandatorily audited their books of accounts and file tax audit report.

Here as you mentioned, turnover exceeds the prescribed limit in FY 2020-21 then audit report has to be filed in respective assessment year ie. AY 2021-22.

You can refer below article for more insights about tax audit:

Hope, it helps!

1 Like