Siva, Cash account in the US allows some risk defined options since the entire risk has been paid for. Infact, there’s a reputable broker in India who opens a cash account in the US and I spoke to them and they said it’s infact legally allowed to trade in very limited options. I think you probably understood which broker I am talking account, Just don’t want to popularize it here.
Don’t popularize it, but can you tell me via dm or something? thanks!
namitjain,
Assuming that it’s allowed, why can’t we trade all options available, why only 1 or 2 index’s, cash related options are offered on all us companies.
thanks
US FINRA rules. The options have to be European Styled cash settled options. Most of the options in US are American style physically settled.
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Don’t think so, if anything is wring, can you can post it here,please.
I think since many people are interested (already got a few DMs), i’ll just name the broker. I spoke with Interactive Brokers some 4-5 months back. First they had listed the types of options that can be traded in Cash accounts by Indian residents, I thought they wrongly just copy pasted the US page in India, and honestly it was copy pasted. But then I called then and confirmed twice, and reminded them about LRS. They still said we are aware, you can do everything that’s allowed in a Cash account. I checked FINRA rules, and they mentioned Options are allowed in cash account, where the entire risk is covered, so cash secured puts and covered calls are obviously allowed. I think even LRS would’t restrict that. For vertical spreads they mentioned that the option has to be European styled cash settled, so I found only SPX and may be a few other indices that fit that criteria.
This research was done some 4-5 months back and was very limited so I did not save links to my research. I’ll try to find those rules and post it here. I think the FINRA rules can be easily found. Not able to find the page on IB’s website as there website is a mess. Apart from the homepage, the entire website is a mix of Indian and US pages. Navigation is difficult.
Edit: Just went through IBs website, they have changed a few things with navigation. Will try to find it.
Edit: Good luck. I forwarded this page to someone months back, whatsapp had it backed up. here’s the IB link,
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Irrespective of what any one says, trading derivatives in US stocks from India is NOT ALLOWED. I have an account with Interactive Brokers and they categorically do not allow derivative trading from that account. However, some form of margin trading is allowed in equities (never tried).
@sandepca we both have spoken to Interactive Brokers and have gotten different responses, so let’s not just come to a conclusion based on your experience, unless you have actually tried trading vertical spreads in SPX or any other European cash settled options or covered calls and cash secured puts and got rejected. There’s also FINRA rules and not just IB saying that they allow some options in Cash account. If LRS still disallows that then action should be taken against IB (They are a big broker, they probably checked the legality). This forum is to keep the discussion open and come to a conclusion based on hard facts.
I personally still don’t recommend going that route, because it’s too much trouble for too little, but someone might have a use for it.
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Sir SPX means S&P 500 index??
Yes. There’s also SPY which is SPX divided by 10. But that’s and ETF and the options for those are American Style and physically settled.
Just please answer one more query
How legally we can trade options in foreign market
See you can do covered call if you have equivalent shares in cash market in interactive brokers no problem
This whole thread is based around the 1 question you asked. Please read through it.
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I had cash account with them in the past, did only stock daytrading with it.
were u able to do sell and buy in intraday ?
Yeah ofc, no shorting or margin allowed, only your settled cash!
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@siva @namitjain2890 Any info about trading US options from a Resident Foreign Currency (RFC) Account?
I found this at the bottom of the page: Reserve Bank of India - Frequently Asked Questions
The funds in RFC accounts are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment outside India.
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Hey Surya,
The RFC account is generally an account opened to receive foreign currency from the earnings made by services rendered outside India/to a person who is not a resident Indian or from any Export related activities generally, or a NRI may keep it in such an account while returning back to India permanently or from gifts. This is not money that an Indian would be remitting from India towards another country or converting from rupees to another currency.
Any money from this account can be used freely and will not have any LRS related restrictions (such as margin based products & options). In case a US based broker does allow you to link the RFC account, you should be legally allowed to trade options. But I’m not sure whether it would be easy for a US based broker to verify your bank details & do the third party verification check to make sure the account belongs to you (this check is required by brokers everywhere to follow anti money laundering rules). We, at Zerodha, generally do a penny drop verification (send across 1Re to your account to verify your name) and match it with your name as per KYC/ID details.
Hope this helps.
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@somnath248 Good to hear this. I work remotely and receive USD as a wire transfer to my domestic savings account. One of my bank staff recommended a foreign currency account which I assume is this: https://sbi.co.in/web/personal-banking/accounts/saving-account/resident-foreign-currency-domestic-account
Why would it be difficult for a US broker to verify this bank account?
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Hi, Just wanted to check if someone has successfully established a company abroad (Singapore, Dubai etc) AND is trading derivatives in USA/Global Markets?
I am clear on the process for getting a company established in Singapore but I am unsure on this one aspect as of now “CAN ONE REMIT MONEY FROM INDIA TO HIS COMPANY IN SINGAPORE FOR MARGIN TRADING/LEVERAGE/FNO”?
I am attaching a page from RBI LRS QnA which seems to indicate that this cannot be done.
BUT DOES THIS HOLD TRUE EVEN IF YOU START A BUSINESS ABROAD ?
Please do let us know here. Will be grateful if i can get in touch with the person to gain guidance.
