Hi @Jason_Castelino, Excellent idea and worth what i was searching for!! i have few queries though
What if ITM CE of 1.44L becomes of value 2.5L (lets say sbi went further 10%) up. Then in fno how much loss will it adjust to. 1a. Similiarly if it goes down to 0.7L then?
Does full time brokers allow Margin money for this or you have to have hardcore cash balance?
Overtime is there any enhancement that you have thought of in this Strategty to maximize profits conversion further
I’m preferring to use PE startegy when we want to anyway sell them then do this easily. and lastly
Have you continued using this over these years and saw any issues from broker side or IT dept side and is it possible to change cr’s using this?
The value of the option on expiry doesn’t matter. You will be getting delivery of stock at the strike price of the option. Now after its delivery to you, if sbi goes up by another 10 percent, obviously there will be more loss in Fno and higher profits in CG. Same way if sbi falls in those 2 days, then Fno loss reduces and cg also reduces.
You will have to check with stock delivery policy of the broker. If your account runs into debit balance usually most brokers charge interest.
Yes. If you are having surplus cash which you prefer to keep it in FD or debt funds, then after delivery of stock to your demat account, just don’t sell it. Keep rolling futures short position.
If you do this, you will not have any capital gain since you have not sold the stock. Assuming stocks keep appreciating year on year there will be more loss in Fno. In addition to delaying taxation this would also give you 7 to 8 percent return annually which is equal to the returns of debt funds.
Ohh understood
Up till now, I thought that since the premium is being paid in direct relation to the acquisition of shares we can say the cost of acquisition is 700+ 131 (premium paid)
Like how it is done for almost anything brought on premium even when the fact is known that you’re paying a premium
I am not sure if this is already discussed, but an enhancement to this strategy would be doing this in March expiry.
Your loss in options would fall under current FY. So you will pay less tax.
Your profits in STCG will fall under next FY. So, you can totally avoid paying tax this year and worry about it next FY.
Hi @Jason_Castelino,
I’ve a few more questions. Hope you would help me.
Step 1: Buy Deep ITM (At least 20 percent away) call option of the most liquid stock that you know 3 days before the expiry date. (Monday of the monthly expiry week)
Is there any specific reason to buy CE 3 days before? Can I buy on expiry day itself? So, there will be no premium.
Do let me know if there is something hidden rule.
Step 3: Accept delivery of the same on expiry.
Considering the buying the CE on Thursday, When we will receive the STOCK delivery? I’m trying to understand the timeline.
When I created this post, taking long position on options in the last 2 days was restricted. Now I guess it is allowed. So yes, you can buy on the expiry day.
Again, it was t+2 before. So the stock used to get reflected on Monday or max by Tuesday. Now it will come by Friday only. In case of short delivery it may come on Monday.
You don’t think this is clear mechanism of changing business profit to capital gain and vice versa?
Moreover in AIS of Income tax department site they show acquisition cost as per prevailing rate and not according to strike price?
@Jason_Castelino Sir can we use reverse strategy? if one has STCG of 2Lakh, he can show it as F&O income by setting off with STCG and avoid paying 20% tax. sell deep ITM call, earn premium eual to 2L, exercise the contract, Give physical delivery to broker at strike price.(considering trader bought stocks at spot price recently) But can giving physical delivery to broker at Loss be consider as Short term capital loss?? its imperative to consider it as STCL for setting off with STCG…otherwise no point in using this strategy.
@ZeroIndian@SpacemanSpiff When option contract is exercised on Expiry day, we need to give physical delivery of stocks from our Demat Holding to broker for physical settlement. Is giving physical delivery of stocks consider as Capital Gain/loss or F&O income?
As Giving physical delivery from Demat Holding is considered as “Sale of stocks”.
So, is it needed to report in ITR as Capital income or F&O income ?
