Thanks a lot for sharing the strategy with so much detail.
This will be even more disastrous. Retail Traders are not afraid of losses, you think they will think even once about the taxes 
Jokes apart, I don’t think this will happen. Retail Traders are a very small part of the market. Most of the heavy options trading is done by HNIs and Ultra-HNIs. It would be stupid to hurt their sentiments. And don’t forget, government gains the most from this trading. Government earns close to 40,000cr annually from STT and the GST charged on it.
Personally, I get this feeling, from now on, before every budget we will get to hear such rumors. It is equivalent to the dream of Middle - class " Yeh budget mai shayad taxes kam honge." I know for sure, a tax on FnO would hurt the rich and ultra rich, even more than Retail traders. Paying a 30% tax on a 1000rs of extra income monthly, is actually not a bad deal.
But lets see what happens. I just hope they don’t take such drastic steps. Education is much more effective than mere Restrictions. This will just mean this, Rich can have an option to get even richer because they have money to loose. And for someone who is really good at trading has no option but to give 30% as tax, just because he or she is a Retail Trader.
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Hi
Thanks for sharing this detail. I am unable to figure out how to save myself when fat finger trades cause market distortions.
For example if the intrinsic value for an option I have sold is 10 rupees, but for a few minutes during the day the options starts trading at 10p. Now if there is sufficient liquidity in the market then my stop loss would get triggered. But if the market is illiquid then I would get a margin call from the broker. I have read a few such cases happening on Indian exchanges over the past couple of years. How can I protect myself in this situation?
So you can’t completely avoid this. Even my Algo couldn’t survive in Sept2023 when the option movement was pathetic and fat finger trades were just adding to the problem. That’s when I realised even my option strategies which have a stop loss, should have a hedge. Hedging is the only way you can avoid this.
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You said clients. What license does one need to trade on clients capital? If not a license, then what legal structure can be set up to trade with clients money?
So actually you don’t need a licence to create and Market these strategies. I am using this only for myself. There are softwares and some website like Algotest and Quantman, where you can create the strategies and deploy then directly into your trading account. The money stays with you only.
Ok. But even your hedge would depend on sufficient liquidity being available at that point of time. And I am not sure if there will be sufficient liquidity at a price which is so far away from the price of the underlying. What has been your experience?
Well if you are only considering far out of the money option selling, I don’t do that. As you said, there are liquidity issues and risk reward given the margin I have to give for few rs premium, does not make it worth it. I don’t go far out.
But you have to accept these challenges. I am not saying I am completely protected in case of fat finger trade but this is something that is beyond my control.
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