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Calculation of turnover in option trading

23 July 2024

how to calculate turnover in option trading in case of loss

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Rama chary Rachakonda (Master in Accounts & high court Advocate email ID:ramachary64@gmail.com voice no:9989324294) (8045 Points)
Replied 23 July 2024

Determine the total premium received: Add up the total premium received from selling options,
Determine the total premium paid: Add up the total premium paid for buying options.
Calculate the net premium: Subtract the total premium paid from the total premium received.
Add the net premium to the notional value of the options traded: Multiply the number of contracts by the strike price and add the net premium.
Consider the loss: If the net result is a loss, use the absolute value of the loss as the turnover.
Formula: Turnover = (Total premium received -total premium paid)+ (Notional value of options traded)
Example:
Total premium received: Rs.1,00,000
Total premium paid : Rs.1,20,000
Notional value of options traded: Rs.5,00,000(10 contracts x Rs.50,000 strike price)
Net Premium = Rs.20,000(Rs.1,00,000-Rs.1,20,000)
Turnover: Rs.5,20,000 (Rs.20,000) + Rs.5,00,000