OTMs expire worthless. Why do you want to close them.
The ones who let ITM expire I believe they have a hedged position which are both in the money.
Even I let them expire and not square them off.
If I have futures long and call short which is ITM I always let them expire unless I want that margin for something else.
Some broker deduct amount as notional charge on that hedged ITM contract and that broker who charge is at 0.1% of the difference in contract notion value b/w those hedge position.
You must exit the position before expiry, many people do not and that is what causes confusion. It takes a lot of experience to understand options, give time to learn. Good luck!
Why so ?? Any particular reason ?? If I don’t have alternative use of the margin I would rather prefer to let them expire worthless as an option seller.
STT is applicable only on sell side transactions of FnO. If you exit your option position before expiry STT is 0.05%. If however you let the option expire in the money or the option gets exercised then STT charged will be 0.125%.
What if we have position in future and contract gets expired. Will we able to pay STT of 0.125% of contract value or we will resistricted to previous STT charge.
What will be STT charge on his hedge position?
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Since he has already sold the call, STT would have already been charged for that sale transaction at 0.05%. On expiry on settlement its technically a buy to close the sell for which there is no STT. Sale of long futures will attract 0.01% STT on settlement.
STT is charged per transaction and not per order. So even if one has a hedged position there is no special treatment. One will have to pay STT for each leg sale transaction whenever it becomes applicable.
Sorry @Jason_Castelino missed this. Right, the STT of 0.1% is applicable if you have 2 open positions on expiry that result in a net-off (Long futures and short call options, short put, and short future, etc) you are not required to give or take delivery for the position. However, there will be STT charged on the long position(s) as this is treated as notional delivery.
If you let the long ITM option position expire, then STT of 0.125% is applicable on intrinsic value of the option. Not on the contract value. You can check out this post for more information:
If you’re an option seller then this 0.125% STT is not applicable as it is already paid when option is sold. Which is 0.05% on sell side (on premium).
Index futures are cash settled and only sell side STT is applicable. If we see this therefore future settlement STT should be 0.01% only. 0.1% is only for equity derivatives. @ShubhS9 are you implying that even open index futures will incur 0.1% on settlement ? Please let me know your thoughts.
Its for equity delivery , also cleared in sr no 1 and 2purchase or sale of an equity share Sr no 3 is for equity intraday contract is settle otherwise than … Sr no 4a is for before expiry of contract. Sr no 4b is for after expiry of contract but on intrinsic value as cleared by @ShubhS9 Sr no 4c is for sale of future contract
Also note on below is cue to know what sr no3 is saying.
Equity derivatives are physically settled and hence STT as in delivery may be applicable. But not for cash settled index derivatives is my reading on this.
sale of an option in securities, where option is exercised
And option is in derivative segment but not sure about future buy position , how much stt will apply on exercised contract. Is there anything you know about it.
Anyways I still feel my interpretation is right. And I have let them expire for almost a year now. I have checked the charges also. It’s just that you keep confusion everyone here so I wanted second confirmation. If @ShubhS9 responds it would be great. Otherwise also I guess am fine.
Right, since the STT for Futures is applicable on the sell side, it will be applicable when you square-off your long position.
Yep, the STT is already paid. The STT of 0.125% is applicable only on Long ITM Options.
If the option expires ITM, the brokerage will be applicable. If it is OTM, it won’t. No brokerage on expiring futures contracts. Also, the ITM option will be settled at intrinsic value and futures position at the closing price of the index. So the bid-ask spread doesn’t matter.
The STT of 0.1% is applicable only for Stock Futures and Options when taking physical delivery, this is applicable for both buyer and seller. Explained here.