Trading Derivatives in USA from India

Just because they allow doing something that doesn’t mean its legal. Under what income head would you report that transaction under? They don’t have an operating entity in India. I doubt they answer to any of the Indian regulators, like the RBI.

You are obviously a scammer, this reply his not for him but for everyone else to not indulge into it

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Correct. I’ve reported this to the admin team.

So the Brokers that allow cash accounts for Indians,
have they violated indian Laws ? Because cash account allows at least buying of calls and puts… there is no margin account involved in cash account… so is that illegal.?
Secondly someone who was an NRI and already has money in their US brokerage account and later moves to india and converts their brokergee account to cash account… they must still be allowed to buy calls and puts … there is no LRS money involed anyways…
What are your thoughts on bothe these points? Thanks

Hello there,

I found your response on this forum quite convincing and it does match with some other forums response that i read regarding cash account with foreign brokers. I just wanted to reach out to you to ask if you have ever faced any issues untill now in tax filing etc. ? Since your comment is dated, i thought you would be best to advise if what you mentioned about legitimacy of opening account still holds good. Thanks in advance. Your response would be greatly appreciated. I plan to open a charles schwab cash account and buy calls puts covered calls etc in US stocks and etf. Thanks.

Hi Kari 0019,

I dont want to mislead you, so here are more findings on my message that you have quoted.

With regard to trading US options with Indian earned money, this would directly fall under LRS. I would be wrong if I say its completely legal. Its a grey area. Because, I dont think RBI is aware that there is something called “Cash Account” for trading. So the information is not black and white on this. Technically, cash account do not allow margin trading. But we can flip options with our own money in our account. Its not clear as to if RBI considers F&O as margin automatically, in which case it would be illegal for an Indian resident.

With that said, In my view, you should be fine to day trade options in cash account with your US earned money which you did not bring back to India. If anyone has any information on the restriction on this specific case, please post.

Ask if you have any questions on this. Cheers

I would beg to differ here. Any skill worth having need a lot of effort. We have to put effort to become the gambling house. For the house, its not gambling money. House always wins in the end. But how do they win? well, when the players focus on winning in next 5-10 plays, house, instead, have just a very small edge. They change the game outcome bias probability slightly in their favor. Most of the houses have like 1-10% depending on the games.

So, even in trading, I think the moves are random 95% of the times. And if we react to every direction change, then yes, its gambling. There are some inflection points where the trading becomes slightly predictable. We just have to wait patiently to trade just that and only that. Thats how profitable traders become profitable. And guess what? the profitable traders do not have huge probability edge either. They just have a strategy with like 55% win rate with more than 1:1 Risk:Reward. They just apply that to 1000s or trades. We just apply for 2 trades, change the strategy and lose money, throw the risk management out of the window to get back the money we lost, and next thing you know, our account is at 0 and we end up quitting.

I read a stats somewhere, that 40% of the day traders quit in 1 month of starting. This is why, 95% of the day traders fail to become profitable. This is a tough career for sure. Just like becoming a cricketer, or an ISRO scientist. Just because the probability is against us, that doesnt mean its not doable.

Life in itself is a gamble. Play the odds. Make the best out of cards drawn.

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I agree. But even in life, people’s action does make probability of some situations to occur a slightly more predictable. For example, the probability of a person slapping me increases exponentially if I slap him first. Lol. But We cannot conclude 100% of our life is a gamble. There are some situations in life which doesnt depend on “cards drawn” at all. And this quote from you can be used to suit any argument to generalize an issue from which we wouldnt get meaningful solutions.

Life itself is meaningless eh?

Well my 2 cents and maybe completely wrong.

Well the guidelines are only on FEMA because we don’t want INR to be converted to a different currency for margin trading.

So the best guess is if you are earning abroad that money can be used to do derivative trading.

The brokerage firms in India are not registered for CFD/OTC trading and hence there is no regulator for these. So there will be no legal recourse in cases where the broker defaults. Since only FX conversions are not allowed a lot of these brokers are allowing INR deposits / withdrawals which technically may not be wrong. So it’s a 50-50 case.

A lot of Traders who are doing very well ( experienced ) are shifting base to Singapore / Dubai where it becomes easy to trade in any world markets. Here the regulated brokers are governed by the local body and such good brokers also provide insurance for your funds in case of company default ( Europe and Australia ).

A case of opening a company abroad and then trading too could be considered but a good advice from solicitor / CA would be needed.

Maybe in 5-10 years time India May recognize CFD and other different products . ( we know how Cryto ETF could become a thing in US ).

How conservative India wants to be is something we need to wait and watch.

P.S. - Folks just my personal views

Can I trade using Groww legally in India? Like just buying stocks & selling them? Like Intraday or BTST trades?

Groww don’t provide margin account, Basically, i will be investing in USA stocks but selling them really quickly (Intraday or BTST)??

And doing thousands of transactions every year in Groww?

Hi Venk,

Could you please help me to identify which business license is required to trade in US derivatives?

If you buy Property in US, after selling it can you use the money from it for trading?

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if you are opening a company in Dubai you dont need any license to trade your own money… Only when you want to have a hedge fund/Prop firm or brokerage you need to obtain an approval and license from the UAE govt. Trust this helps.

Hi Everyone, one way by which you can trade the US markets S&P and Dow Jones etc. from india is by opening an account with Exness, you can deposit money is exness by P2P transaction, so it would not come under LRS and FEMA, therefore that problem is over but you cant buy options directly but rather you can directly buy the indices with margins from 1:2 to even 1:Unlimited, with ofcourse risk management and other calculations, this way in my opinion is even better as you would not have to account for option greeks like theta etc., infact i have even tried it out on demo accounts, so you may also try it.

P.S:- I am a 16 year old so it may be better if you once again research and cross-verify this method, and due to my age(lack of funds & study), i have not tried it on a real account.


Hi everyone, I used to trade options and futures while being an NRI. However, in one of the years, I was forced to stay for more than 182 days due to a flight ban, and so I will be treated as a resident. I have loss from options and futures trading abroad in that year. Should I file it as business income or capital gains income?

Hey @Software_Engineer,

Trading in futures and options is considered as business income. Hence, you will be required to file ITR-3 and report the same as income from business.

Hope this helps!

can itr4 also work ?

Hey @HSL,

ITR-4 is filed when you are opting for the presumptive taxation scheme. You can opt for the same if your business turnover does not exceed ₹2 Cr and have not maintained any books of accounts. In the case of trading, the records are easily available and hence it is recommended to report it under regular business income and file ITR-3. Moreover, you cannot carry forward losses if you file ITR-4.