What happens to buyer if i close my option selling position?

[247NH]

I heard that option buyer has expense of stt of 0.125% on whole contract value. And STT implies on sell side of option. Is that correct?

[t7support]

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%.

[247NH]

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.

@Jason_Castelino

If I have futures long and call short which is ITM I always let them expire unless I want that margin for something else.

What will be STT charge on his hedge position?
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@t7support

[t7support]

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.

[ShubhS9]

@Jason_Castelino

Not for index. I think that’s applicable only for stock derivatives. Correct me if am wrong @ShubhS9

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.

@247NH

I heard that option buyer has expense of stt of 0.125% on whole contract value. And STT implies on sell side of option. Is that correct?

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:

Starting Sep 1st, finally no more STT trap on exercised options

So finally, after years of voicing this issue on every possible forum, there is no more STT trap on exercised options (announced this budget). Here is the circular from NSE http://www.nseindia.com/content/circulars/FATAX41919.pdf [image] STT on exercised contracts from Sep 1st, 2019 will be charged at the rate of 0.125% of intrinsic value (how much in-the-money the option is) and not on the total contract value like earlier. Intrinsic value for OTM (out of the money) options is always zero,…

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).

List of all fees, charges, and taxes on trading and investing

[Jason_Castelino]

Thank you for your detailed reply @ShubhS9
Kindly let me know if I am interpreting it rightly.

If am long on futures and I have to close future manually, even then STT is applicable.
If I have short call which is ITM I have already paid STT.

If I let them expire I can save on brokerage and also small time value on the option. Also have to bear bid ask spread.

So it does make sense for me to let my index positions expire unless I want to use the margin for something else.

[247NH]

@ShubhS9

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.

Thanks for correcting me.

If option get delivered and we are short in margin what will be penalty.

@Jason_Castelino

If am long on futures and I have to close future manually, even then STT is applicable.
If I have short call which is ITM I have already paid STT.

Bro STT is applicable on sell side on all segment except currency. AND delivery has STT on both buy and sell. So you have to pay STT on it.

@Jason_Castelino

If I let them expire I can save on brokerage and also small time value on the option. Also have to bear bid ask spread.

So it does make sense for me to let my index positions expire unless I want to use the margin for something else.

@ShubhS9 Ya , I want to know about this too.

[t7support]

@247NH

Bro STT is applicable on sell side on all segment except currency. AND delivery has STT on both buy and sell. So you have to pay STT on it.

I guess @Jason_Castelino is referring to index futures if we read his previous post.

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.

[247NH]

@t7support

0.1% is only for equity derivatives.

Its for equity delivery , also cleared in sr no 1 and 2 purchase 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.

Correct me if I am wrong. @ShubhS9 @Jason_Castelino

Also that there is no sr no. for buy of future if contract is exerciesed. What will be STT for future buyer if contract get exercised?

[t7support]

@247NH

Its for equity delivery

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.

[247NH]

@t7support

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.

In image it written as

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.

[Jason_Castelino]

@247NH

Bro STT is applicable on sell side on all segment except currency. AND delivery has STT on both buy and sell. So you have to pay STT on it.

U know am taking about index right.

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.

[Vij]

@t7support

Index futures are cash settled and only sell side STT is applicable.

This.

[ShubhS9]

@Jason_Castelino

If am long on futures and I have to close future manually, even then STT is applicable.

Right, since the STT for Futures is applicable on the sell side, it will be applicable when you square-off your long position.

@Jason_Castelino

If I have short call which is ITM I have already paid STT.

Yep, the STT is already paid. The STT of 0.125% is applicable only on Long ITM Options.

@Jason_Castelino

If I let them expire I can save on brokerage and also small time value on the option. Also have to bear bid ask spread.

So it does make sense for me to let my index positions expire unless I want to use the margin for something else.

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.

[ShubhS9]

@t7support

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.

Not applicable for Index futures contract.

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.