I read this twitter post (a poll):
will you transfer rs 120 to a trader who was charged with STT of 6.25Lacs.
Agreed its traders’s fault but stiill…
In response to that tweet, someone asked -
Can I ask at what price this PE was purchased?
average of 1re for 500 lots or 20k shares.
I don’t know F & O. So, I could not understand it. But I want to know why it is so risky. How this much loss is possible? How just 20K shares amount to Rs 6.25 Lakh STT?
Please answer in simple pointed way.
You can assume steps Traders may have taken then explain the possible loss that could have come and STT charge on that. What he could have done to avoid them even in loss, if possible!
Just one possible case and answer to that will keep the reply simple.
Update: With effect from 31st August 2017, the exchanges have put in place a mechanism to address this anomaly. More details on this change here. Traders, Why do options trade at lesser than the theoretical value on the last day of expiry? Why is it...
I think above article can answer it clearly. Letting options expire is an expensive affair. I found out it the hard way too.
Best thing to do is to convert long options to intraday on expiry day (zerodha allows this, probably others should too). Just set a calendar reminder for this. This way, you can be assured that the broker will square off before expiry and you won’t be assigned the options, so no issues of STT. You probably lose 5p or so but that’s a small price to pay in the grand scheme of assignment risks.
I think this is similar to this case
Chirag Gupta, who trades in futures & options, had made a profit of Rs 6 lakh, but...
| This day trader lost Rs 24 lakh in 5 minutes