Last updated on January 12th, 2017
Options trading is always considered as another form of gambling. Though they are meant for hedging, in India many retail traders directly trade options (Naked trading). The options price is determined by many parameters and if not traded properly your money can vanish in thin air within no time. On the other hand, they can provide high reward also. But if you have what it takes to trade this double edged sword, you need to look for a reliable broker who offers Lowest brokerage charges in India for options trading. In this article, we have tried to find out the best broker who charges minimum commission rate for Options trading in India.
Methodology used to identify India’s Cheapest Stock broker for Option Trading
We have assumed certain parameters for our analysis.
- NSE Nifty options are considered for calculation as it is widely used and most liquid
- Premium Value of Nifty (CE or PE) at value of 8000 – Rs 150 (approx) for both buy and sell
- Nifty lot size is 25, premium value will be Rs 7500 (Rs 3750 on each side) for one lot
- 22 Trading days per month are assumed
- Same Brokerage charges for Intraday trading as well as over night positions
While we made above assumptions, we straight away excluded Full Service Brokers who charge brokerage on per lot basis hence they will never be a choice of traders as far as options trading is concerned. We will quantify the amount at the end of this article.
So we have left with discount brokers who charge competitive flat brokerage amount for online trading irrespective of size of the trade. We have talked about Top 10 Flat Brokerage Stock Brokers of India in the past. Out of these ten, we are considering Zerodha, RKSV Securities and Tradejini for our analysis.
Reason being, though many discount brokers in India charge less than the above 3 brokers, it is not advisable to over emphasize only on lowest brokerage trading account as we have seen Unicon Securities going burst who used to charge Rs 5 per order. The brokers we considered are country’s largest discount brokers and it is always better to go with the leaders of the industry.
Cheapest Brokerage for different Options Trading Turnover
Now that we have shortlisted the brokers, it is time to select the cheap and best share broker for options trading in India. For this, we need to consider one more parameter, i.e turnover.
Unless we know the average number of trades executed by you, it is difficult to arrive at the conclusion. So look at the table below. We tried to tabulate the charges of all the three brokers for different turnovers.
Number of Lots/Day Zerodha RKSV Dream RKSV PRO Tradejini
Brokerage Tax Net
Brokerage Tax Net
Brokerage Tax Net
Fee Taxes Net
1Lot/Day 40 11.14 1125 40 10.96 1121 3999 5.37 4117 40 11.17 1125
10Lots/Day 40 57.07 2135 40 59.16 2181 3999 53.54 5176 40 57.12 2136
50Lots/Day 40 264.93 6708 40 273.36 6893 3999 267.74 9889 40 264.98 6709
100Lots/Day 40 524.25 12413 40 541 12782 3999 535.5 15780 40 524.25 12413
Net/Month = (Brokerage+tax)*22 [ for RKSV PRO Plan Net/Month = Brokerage+ (tax*22) ]
All these three firms provide brokerage calculator at their website. Above values are arrived using respective calculators. Providing the brokerage calculator is another sign of transparency which helps the trader know exact charges he is going to incur based on his trade size without initiating the trade in actual. It is not the case with full service brokers where your brokerage depends upon your negotiating skills.
Analysis of the Results of Lowest Brokerage:
So depending upon your trading profile, we can zero on the suitable broker. The results will be even more clear if we put it in graphical form.
One of the Interesting finding of this analysis is about RKSV PRO Plan. RKSV Offers unlimited trading for Rs 3999. At the first Impression, it looks least brokerage charges for F&O. But as you see, when we add up the tax part to the fixed amount, RKSV PRO plan is NOT the lowest brokerage plan for Options trading irrespective of the trading volume. Their Dream Plan will work out to be cheaper than the PRO plan when the net outflow is considered. But it is also worthwhile to note that in PRO plan, one can do unlimited trade not only in options but also in Equities and Futures. But as we are discussing only about options trading, this is not the best brokerage plan for options trading. You can read our detailed RKSV review at Review of RKSV page. Use below button to request free callback from RKSV Securities and discuss about their brokerage plans and trading platforms.
Tradejini’s Brokerage charges are more or less similar to that of Zerodha’s and there is no significance difference in the net outflow. Tradejini is currently offering 30 day’s of unlimited trading across all the segment like Equities, F&O, Commodities, Currencies on NSE, BSE, MCX and also demat account. You can find our detailed review at Tradejini Review page. Use below button to request free callback from Tradejini and discuss about their brokerage plans and trading platforms.
Zerodha is the leading discount broker of India who offers flat fee of Rs20 per trade and they don’t have any monthly brokerage plans. Zerodha have good track record since 2010 when they first introduced the discount broking concept to India. They also recognized for coming up with many technology initiatives and innovative ideas. You can read our detailed review in the Review of Zerodha page. Use below button to request free callback from Zerodha and discuss about their brokerage plans and trading platforms.
Now let us calculate the brokerage if we consider full service brokers. Their charges range from Rs70 to Rs130 per lot. Let us consider average of Rs100/lot. For traders who trade one lot per day, monthly brokerage will be Rs100x2(buy & Sell)x22= Rs4400.
For traders who trade 100 lots/day, it will be whooping Rs100x2x22x100 = Rs 4,40,000/- in comparison to Rs 12,000 charged by discount brokers, hence full service broker are highly expensive for options trading.
Conclusion from the analysis : Though there are many stock brokers offering lowest brokerage for options trading in India, we need to take many parameters into consideration. Discount Brokers offer considerable savings when compared to full service brokers. It is also important to always go with the leading discount brokers. It is not only brokerage but taxes also matter when net amount is considered. Hope you liked this post, you can find more such interesting and informative articles at our Archives page.
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