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Retail investors should avoid derivatives

Unless you know the rules completely, you could end up paying higher STT than your profit

Tinesh Bhasin 

Imagine investing about Rs 11,250 in the stock market and getting a return of Rs 6.08 lakh in a span of five minutes. But when the broker sends you the contract note, the securities transaction tax (STT) for the trade is over Rs 24 lakh — almost four times the profit — and it’s not a printing mistake.

It happened with 27-year-old management student Chirag Gupta. When about five minutes were left for the markets to close, Gupta saw that he could buy Nifty call options at 5 paise per unit and make a profit of around Rs 2.75 a unit. He bought options that Nifty will ...

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First Published: Thu, April 06 2017. 02:38 IST
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