Understanding the cost structure of options trading is crucial for any trader looking to maximize their profits. Zerodha, one of India’s leading discount brokers, offers competitive pricing for option trading.
In this article, we’ll break down Zerodha’s option trading charges, helping you navigate the fees associated with this popular investment strategy.
Zerodha has gained popularity among traders for its transparent and straightforward fee structure. When it comes to options trading, the brokerage follows a flat fee model, which can be advantageous for frequent traders. However, it’s important to note that beyond brokerage, there are other charges to consider, including regulatory fees and taxes.
Let’s dive into the details of Zerodha’s option trading charges, exploring how they compare to other brokers and what you need to know to make informed trading decisions. Whether you’re a seasoned options trader or just getting started, understanding these costs is essential for developing an effective trading strategy.
Charges on Option Trading
- Brokerage: Zerodha charges a flat fee of ₹20 per executed order on all options trades.
- Securities Transaction Tax (STT/CTT):
- 0.05% on the sell side for commodity options.
- 0.1% on the sell side (on premium) for other options.
- An additional 0.125% of the intrinsic value applies to options that are bought and then exercised.
- Transaction/Turnover Charges: These are charged by the exchanges (NSE, BSE, MCX) on the value of transactions.
- NSE charges 0.03503% (on premium).
- BSE charges 0.0325% (on premium).
- MCX charges 0.0418%.
- BSE has different transaction charges for different groups of securities.
- GST: This tax is levied by the government on services rendered and is calculated as 18% of (brokerage + SEBI charges + transaction charges).
- SEBI Charges: A charge of ₹10 per crore + GST is levied by the Securities and Exchange Board of India (SEBI) for regulating the markets.
- Stamp Charges: These are levied by the Government of India as per the Indian Stamp Act of 1899 for transactions in instruments on stock exchanges and depositories. The charge for option trades is 0.003% or ₹300/crore on the buy side.
- Call & Trade: An additional charge of ₹50 per order applies to orders placed through a dealer at Zerodha, including auto square-off orders.
- Investor’s Protection Fund Trust (IPFT) by NSE:
- ₹50 per crore + GST of traded value (premium value) is charged for options.
Important Notes:
- Brokerage is also charged on expired, exercised, and assigned options contracts.
- If an account has a debit balance, a charge of ₹40 per executed order will apply instead of the standard ₹20.
- NRI brokerage charges for options trading are ₹100 per order.
Illustration of Brokerage Charge
Let’s take an example in which a trader buys the TATA POWER 450 CE at Rs. 12, with a lot size of 1350, and sells at Rs. 20, Here is a breakdown of the charges based on the information provided in the example.
Assumptions:
- The trades are executed on the NSE.
- The account has a credit balance.
- The trader is a retail individual client.
Calculations:
- Premium Paid: Rs. 12 x 1350 = Rs. 16,200
- Premium Received: Rs. 20 x 1350 = Rs. 27,000
- Profit: Rs. 27,000 – Rs. 16,200 = Rs. 10,800
Charges on Buy Trade:
- Brokerage: Flat Rs. 20 per executed order
- STT/CTT: Not applicable on the buy side for options
- Transaction Charges: NSE charges 0.03503% on the premium.
- 0.03503/100 x Rs. 16,200 = Rs. 5.67
- Stamp Duty: 0.003% or Rs. 300/crore on the buy side. In this case, it will be Rs. 0.003% of the premium.
- 0.003/100 x Rs. 16,200 = Rs. 0.49 (rounded up to the nearest paisa)
- SEBI Charges: ₹10 / crore + GST. Since this is a small trade, this charge will be negligible and can be ignored for this illustration.
- GST: 18% on (brokerage + SEBI charges + transaction charges).
- 18/100 x (Rs. 20 + Rs. 5.67 + Rs. 0.49) = Rs. 4.65 (rounded up to nearest paisa)
Charges on Sell Trade:
- Brokerage: Flat Rs. 20 per executed order
- STT/CTT: 0.1% on the sell side (on premium).
- 0.1/100 x Rs. 27,000 = Rs. 27
- Transaction Charges: NSE charges 0.03503% on the premium.
- 0.03503/100 x Rs. 27,000 = Rs. 9.46
- Stamp Duty: 0.003% or Rs. 300/crore on the buy side. In this case, it will be Rs. 0.003% of the premium.
- 0.003/100 x Rs. 27,000 = Rs. 0.81
- SEBI Charges: ₹10 / crore + GST. Since this is a small trade, this charge will be negligible and can be ignored for this illustration.
- GST: 18% on (brokerage + SEBI charges + transaction charges).
- 18/100 x (Rs. 20 + Rs. 9.46 + Rs. 0.81) = Rs. 5.58 (rounded up to nearest paisa)
Total Charges:
- Buy Trade Charges: Rs. 20 + Rs. 5.67 + Rs. 0.49 + Rs. 4.65 = Rs. 30.81
- Sell Trade Charges: Rs. 20 + Rs. 27 + Rs. 9.46 + Rs. 0.81 + Rs. 5.58 = Rs. 62.85
Net Profit:
- Profit – Total Charges = Rs. 10,800 – Rs. 30.81 – Rs. 62.85 = Rs. 10,706.34
Please Note: This calculation does not include DP charges (charged on selling shares) as this is an options trade, not an equity delivery trade. This calculation also excludes the negligible SEBI charges. It is important to remember that this is a simplified illustration and the actual charges may vary slightly depending on various factors. Always refer to your broker’s latest fee schedule and use a brokerage calculator for the most accurate calculation.
