Options Greeks for risk management. F&O = business income at slab rate. ITR-3 mandatory. Tax audit if turnover > ₹10cr. STT + brokerage deductible. Loss carry-forward 8 years.
OPTIONS GREEKS = sensitivity metrics of option prices. (1) DELTA: price change of option per ₹1 change in underlying (-1 to +1). (2) GAMMA: rate of change of delta. (3) THETA: time decay — option loses value as expiry approaches. (4) VEGA: volatility sensitivity. (5) RHO: interest rate sensitivity. USE: (1) Risk management. (2) Hedge construction. (3) Position sizing. (4) Strategy selection (long calls, iron condors, straddles). PROFESSIONAL OPTION TRADERS use Greeks daily.
F&O INDIA TAX: (1) F&O profits = BUSINESS INCOME (not capital gains). (2) Taxed at SLAB RATE (up to 30% + cess). (3) NO LTCG benefit. (4) SET-OFF allowed against other business income. (5) F&O LOSS carry-forward 8 years. (6) MUST FILE ITR-3 (business income). (7) TAX AUDIT Section 44AB if turnover > ₹10cr (or ₹1cr without digital). EXAMPLE: ₹20L F&O profit + ₹50L salary = ₹70L total income at slab rates. Significant 30% tax on F&O profit.
F&O TURNOVER CALCULATION (CBDT clarification): (1) FOR INTRADAY TRADES: sum of POSITIVE + NEGATIVE differences (NOT volume × price). (2) Total absolute P&L of trades. (3) EXAMPLE: 100 F&O trades with P&L: ₹50K profit + ₹30K loss + ₹40K profit. Turnover = ₹50K + ₹30K + ₹40K = ₹1.2L. (4) NOT contract value-based. (5) FOR TAX AUDIT: if turnover > ₹10cr (digital) or ₹1cr (other) → mandatory. (6) PRESUMPTIVE TAXATION 44AD: NOT available for F&O (excluded). (7) MUST maintain detailed transaction records.
F&O TRADING COSTS: (1) BROKERAGE: 0.01-0.05% (discount brokers like Zerodha) or ₹20 flat per trade. (2) STT (Securities Transaction Tax): 0.0125% on option premium (buy side), 0.0625% on premium (sell side for options exercised). (3) STAMP DUTY: 0.003% on buy. (4) EXCHANGE TRANSACTION CHARGES: 0.0003-0.0005%. (5) SEBI charges + GST. (6) ALL DEDUCTIBLE as business expense. CRITICAL: maintain transaction-level records. P&L statement from broker. ITR-3 detailed reporting.
F&O TAX STRATEGY: (1) MAINTAIN DETAILED RECORDS — every transaction. (2) F&O LOSS carry-forward 8 years — file ITR even in loss year. (3) DEDUCT all transaction costs (brokerage, STT, exchange). (4) HOME OFFICE deduction (if dedicated space). (5) SALARY + F&O combined slab: plan accordingly. (6) F&O LOSS vs salary: NOT setoff. F&O loss against business income only. (7) Tax audit if turnover > limits: CA engagement mandatory. (8) ADVANCE TAX quarterly if profit > ₹10K. (9) AVOID intraday excessive trading — costs eat profits. (10) CONSULT CA experienced in F&O trader taxation. Cost ₹50K-2L annually for active traders.