I made a profit of Rs. 3,326.25 trading F&O. However, my ledger shows a debit of Rs. 5,186.81. Does this mean I have incurred a loss? Here are my trades and the profit as per Kite. Why do I see a debit on my ledger in this case?
When trading there are two platforms that you use - the trading platform where you trade (Kite) and the backoffice platform (Console) which maintains your ledger/account balance, which is reported to the exchanges. While the overall P&L will be the same on both the platforms, the daily P&L or credit/debit on ledger might differ, here is why.
Kite position P&L
On Kite, the P&L on positions page for futures and options is shown based on your entry price for the position using First in First out (FIFO) method. So in your case, the P&L of + 3326.25 that you are seeing is based on the entry price of all your 3 positions.
So using your trades, the P&L you see on Kite will be calculated this way
| Buy | Sell | ||
|---|---|---|---|
| Nifty Fut | 9016.55 | 9072.5 | 4196.25 |
| Nifty Calls | 104.6 | 97.8 | -510 |
| Bank Nifty fut | 17454.3 | 17436.3 | -360 |
| Sum | 3326.25 |
Credit/Debit on your ledger
For accounting purposes or for crediting/debiting the ledger there is a set standard exchange process for all futures positions - which is called Marked to market or M2M. Exchanges at end of everyday marks all open futures position to the closing settlement price for the futures for that day and either credits or debits the money to client ledger.
- The reason for doing M2M is because futures have unlimited risk and to ensure the person making losses doesn’t default, for open positions the losses are collected on the same day and credited it to the person making profits. The person who made the loss will now have to ensure that there is sufficient margin in the account to continue holding the position and hence ensuring there is no counter party risk.
- For short option positions, there is no M2M like futures, but margin required to hold short options keep going up as and when options go in the money (short options start losing money), thus in a way ensuring that the customer losing brings in more money to avoid the default risk
So what this now means is that while the trading platform shows only one P&L, there will be multiple credits/debits on your backoffice - one entry for everyday you held the position. Since you held the position for two days, there will be two entries on your backoffice ledger - the sum of which will be equal to the P&L shown on Kite.
So this is how credit/debit for your ledger will be calculated for the two days. My calculations don’t include transaction costs, so there will be that mismatch with the screenshot you have shared. (23rd & 24th were saturday/sunday and 25th was a holiday for Eid).
| Buy | Settlement price | Ledger | ||
|---|---|---|---|---|
| 22nd May | Nifty Fut | 9016.55 | 9027.8 | 843.75 |
| Nifty calls | 97.8 | 7335 | ||
| Sum | 8178.75 | |||
| 26th May | Nifty Fut | 9027.8 | 9072.5 | 3352.5 |
| Nifty calls | 104.6 | -7845 | ||
| Bank Nifty fut | 17454.3 | 17436.3 | -360 | |
| Sum | -4852.5 | |||
On 22nd, Nifty closed at 9027.8 and hence buy position is M2M to that price. Since options were sold, that premium (97.8*75 = 7335) gets credited.
On 26th, for Nifty Fut the P&l is calculated from settlement price to exit price. For short options, since they were bought back, the price at which it was bought back is posted as debit. (104.6*75 = 7845). P&L on intraday trade on Banknifty.
Here is the thing, if you sum up the credit/debit of 22nd and 26th, 8178.75 - 4852.5 = 3326.25. This 3326.25 is what you see on your Kite P&L.
Hopefully, this clarifies,
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CEO himself clarifying the minute of the questions asked.Great… 
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I wish every CEO learns from @nithin
Very often he is seen replying to even mundane queries late Saturday night or during the busiest of market hours.
I have heard that Tejas of Fyers is also a complete gentleman.
We at Zerodha ought to give credit where it’s due.
Hoping you will take the trading industry to higher heights
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