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Not knowing the answer to the above questions can cause a potential loss and hence the reason for writing this blog. I am assuming that all of you reading understand the basics of option trading. Many of us would have had the following 2 questions or faced similar scenarios at some point of our options expiration dates 2013 career.

The seeming anomaly in the price or the extra debit in the above scenarios is because of how Options expiration dates 2013 Security Transaction Tax is considered for options that are exercised. Options are considered exercised if you hold buy positions in options till the end of expiry till after 3. STT on normal option trades done on the exchange is charged at 0. So, if you buy 1 lot of Nifty options at Rs and sell it at Rsyou have to pay 0. Usually the STT component while trading options is almost insignificant, in this example it is only Rs 3.

Rs would mean more than 7 points of movement on Nifty options expiration dates 2013, that is how high the impact of STT could be. Love playing poker, basketball, and guitar. How much STT will be charges. As mentioned in the article, since you are writing options i.

Last trading price is What will happen to my Holding? Will it be sold by the exchange at last trading price and return the amount to my account? I think the stock closed at Yes, it will automatically get exercised and you will get this Rs But you options expiration dates 2013 have to pay that higher STT options expiration dates 2013 it.

You should check your contract notes to see all the charges. Right now no buyer to sell the quantity. Do i get bank any amount in last date or i need to pay large STT. If the contract trades in the money there will be liquidity usually and we will lapse all in the money options where STT is more than the intrinsic value of the options.

Check this post for more. Right now i paid for the option value 0. Right now option value is 0. To keep it simple, I sold put option options expiration dates 2013 ITC at strike price of for Settlement will be done based closing price of spot.

You sold it at You make a loss of Thanks so much, Nithin, for explaining this. I was also confused about STT implications on sold options. Now I know that I do not have to buy them back to square off the trade if I am getting to keep options expiration dates 2013 premium. Please clarify one more thing: What if I have to buy back the option to square off as the trade is going against me?

What are the STT implications then? Thanks so much for doing a wonderful job of clarifying things! It will get settled at Rs But yes, you will be forced to bear higher STT which is 0. Until Government looks into this, Zerodha should help every one in implementing a code at 3: Yes Zerodha,You should square off on our behalf.

Its so demotivating that accidentally someone could not sqaure off for some reason so he will have to pay a higher STT. Please bring some new rule on you platform under options. I got one lot of nifty cal at in march last. This call was for may. It costed me 13, in the last March. As of today it was going too low so my stop loss triggered. I got only profit. I should have exit two days earlier which was rs profit. But when I exit today they deducting 13, whole money as premium for option.

Then why do they say for all trade it is make 20 or. So max 20 rs. Only should be deducted. Why this premium for options Plz help me to retrieve this. Bala, STT is charged by the government and not the broker. Unfortunately, the way they charge STT for expired in the money option is not right.

We options expiration dates 2013 supporting this petitionso can you. Hi Punit, nothing like that happens. Usually people complaining about deductions is out of ignorance.

This STT rule is set by the govt. You can check it out all here: On the other hand, this has nothing to do with the Exchange. Exchange merely implements Government Orders within the legal framework it is supposed to adhere to.

In India all options are cash settled and there is no actual exchange of delivery that takes place once it is exercised, only the cash difference is settled.

What is a mistake by the government though is that when they reduced the STT rates for delivery based trading from 0. If a thing which cannot be delivered, how it amounts to the transaction of that thing and the government is charging the tax on the amount of undeliverable thing. Thia did not happen in the kingdom of Aurangazeb in 17th century. Options expiration dates 2013 a lot for explaining, can you please let us options expiration dates 2013. What will happen in case of out of the money call option in not exercised.

Will be highly thankful for your help. Amit, The OTM options expire worthless. More than a mistake, it seems ,the rules are bent in favour of the option writer. After all its the deep pockets that are writers in most cases. STT is levied on the settlement price. Settlement price of an option is defined as the closing price of the underlying, which defies all logic.

What will be STT? If you had bought nifty calls and nifty closed at No one is there to buy my calls as premium is at What happens at expiry. I understood about STT I need to pay, but what will be my profit or loss? As there is no one to buy, options expiration dates 2013 I end in loss? Arun all in the money options get exercised.

If you have calls and nifty closes expiry atyou will get back This will complete my understanding on Options trading. I really appreciate your response for each question of the customer. Thanks Zerodha again and just fyi, I recovered my losses after becoming Zerodha customer which enabled me to do more trades. Hi, In this contact what about STT? I am a house wife and I am doing option trading options expiration dates 2013 last six months.

Can u tell me how can i take my profit and loss statement. PNL statement is available on our backoffice. Yes,ideally you will need to have this audited by a CA. Is STT applicable when I buy back my previously sold call or put option and let it expire In-the-money? Sell Put or call option at SP: X for premium P. Buy that same option i. X for premium Q.

At the time of expiry, options are In-the-money…. Options expiration dates 2013 government is sure of STT income for all the in-the-money option contracts, right?

A sells options to Mr. B then at the time of sale, Mr.

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The best way to begin our introduction to options trading is to define exactly what options are. Although commonly referred to simply as options, the full term is options contracts, because they are financial contracts between two parties. In very basic terms, they specify a future transaction on a specified asset at a specified price. The buyer of the contract has the right, but not the obligation, to initiate that specified transaction.

The seller of the contract has the related obligation to carry out the transaction should the holder choose to initiate it. There are several characteristics of options that essentially make up the terms for any given contract.

The easiest way to define an options contract is to identify those characteristics and explain what they are. We have done exactly that below, and we have also provided some example options to give a clear idea of what they are and how they work. An options contract consists of two parties: The writer is effectively the seller of the contract, while the holder is effectively the buyer.

When the writer of the contract sells it to the buyer, they collect a payment from the buyer and that's commonly referred to as the premium. It's the holder of the contract that has the option to engage in the transaction that is specified and the writer that is obliged to engage in the transaction should the holder wish to go ahead.

If the holder chooses to initiate the transaction specified in the contract, they are said to be exercising their option. Should the holder not choose to exercise their option at any point, then the contract will eventually expire and cease to exist. You can read more about exercising an option here. Options are a form of derivative; which basically means they derive their value from an underlying asset. In an options contract the underlying asset is the asset which is specified in the transaction the holder has the right to carry out.

For example, a contract might give the holder the right to purchase stock in Company X, in which case Company X stock is the underlying asset. The term underlying security is also commonly used, but both terms refer to the same thing.

There's a range of financial instruments that can be the underlying asset in an option. Stock is the most commonly used asset, but bonds, indices, foreign currencies, commodities, or futures can all be used too.

There are even basket options, in which the underlying asset is a collection of different assets. The strike price is the price at which the specified transaction is to be carried out at should the holder choose to exercise their option. Strike price is the term most commonly used, but it can also be known as the exercise price. The expiration date of an option is, quite simply, the date on which the contract will expire.

Options are typically relatively short term and last just a few weeks, although they can also last for a few months or up to a year.

If the expiration date passes and the holder hasn't chosen to exercise their option, then the contract expires worthless. There are actually many different types of options, because they can be classified in a variety of different ways. In a very broad sense though, they can be categorized based on whether they give the holder the right to buy or sell the underlying asset.

In this sense, there are basically two main types; call options which give the holder the right to buy the underlying asset at the strike price, and put options which give the holder the right to sell the underlying asset at the strike price. It should be noted that you don't have to actually own any of the underlying asset to buy a put option, but if you choose to exercise your option to sell the underlying asset you will, in theory, have to buy the underlying asset at that point.

Please see our section on the Types of Options for further details on this. Another way that options can be categorized is based on their exercise style. They can basically be one of two styles: American style or European style. These terms have nothing to do with anything geographical though. An American style option is one where the holder can exercise their option at any time during the term of the contract, up to and including the date of expiration.

A European style option is one where the holder can only exercise their option, should they wish to, at the point of expiration.

American style options clearly offer much more flexibility to the holder, and because of this they are generally more expensive to buy. When the holder exercises their option, the contract is effectively being settled, and there are two ways in which settlement can take place.

They are physical settlement and cash settlement. Physical settlement is where the underlying asset is actually transferred between the buyer and the holder at the agreed strike price. Cash settlement is where the holder receives a cash payment based on any profit they could effectively make through exercising their option. Please see Options Settlement for more details.

When the writer of an options contract sells it to a buyer, the buyer makes a payment in order to purchase it. However, the amount that the buyer pays isn't the same amount that the writer receives. Options are typically bought and sold on the public exchanges, where the transactions are facilitated by market makers.

They basically exist to ensure that there's always a market for options contracts. If someone wishes to sell, and there is no buyer, then the market maker will act as the buyer and complete the necessary transaction. If someone wishes to buy, but there is no seller, then the market maker will act as the seller.

Market makers make a small profit on each transaction. Options contracts are listed on the exchanges with two prices: The bid price is the price you would receive for writing options contracts, and the ask price is the price you would pay for buying them. It's important to note that options contracts aren't just sold to buyers at the time of being written; holders of existing options contracts can also sell them to other buyers.

Again, the seller would receive the bid price and the buyer would pay the ask price. You can read more about the price of options here. To help you fully understand what an options contract is we have provided a couple of examples below, featuring some different characteristics. The holder could exercise their option at any time because it's an American style options contract.

If you didn't own the relevant stock, you would have to first buy it and then sell it on to the holder. If the holder chose not to exercise their option by the expiration date, then it would expire worthless and your obligation would cease. Alternatively, you could hold on to the stock if you preferred. If you chose not to exercise your option by the expiration date, your contract would expire worthless.

The holder could only exercise their option at that point as it is a European style option. Cash settlement options are typically settled automatically if the holder is effectively in profit.

As a cash settlement option, you could expect it to be automatically exercised if you were in profit. Definition of an Options Contract The best way to begin our introduction to options trading is to define exactly what options are. Section Contents Quick Links. Parties Involved An options contract consists of two parties: Underlying Asset Options are a form of derivative; which basically means they derive their value from an underlying asset.

Strike Price The strike price is the price at which the specified transaction is to be carried out at should the holder choose to exercise their option. Expiration Date The expiration date of an option is, quite simply, the date on which the contract will expire. Option Type There are actually many different types of options, because they can be classified in a variety of different ways.

Option Style Another way that options can be categorized is based on their exercise style. Option Settlement When the holder exercises their option, the contract is effectively being settled, and there are two ways in which settlement can take place. Bid and Ask Price When the writer of an options contract sells it to a buyer, the buyer makes a payment in order to purchase it.

Examples of Options Contracts To help you fully understand what an options contract is we have provided a couple of examples below, featuring some different characteristics.

Example 1 Underlying Asset: Stock in Company X Strike Price: Call Option Option Style: Physical Settlement Bid Price: Example 2 Underlying Asset: Stock in Company Y Strike Price: Put Option Option Style: Cash Settlement Bid Price: Read Review Visit Broker.