For anyone trading in options, brokerage could be one of the most important factors which will decide whether you are profitable at the end of the month or not. There are mainly three type of brokerage for options available in the markets
- Per lot Option brokerage – Most of the full service broker charges per lot and there rates may vary from Rs 30 to Rs 95 per lot. In this case, if you buy 10 lots of NIFTY, the brokerage you will have to pay may vary from Rs 300 to Rs 950 and mind you this is for one leg. Most of the broker will charge the same on the other leg. With this type of brokerage it makes really difficult to make profit as almost 8 points of NIFTY goes in the brokerage. Some of the brokers which have these types of rates are ICICI Direct brokers, ShareKhan and HDFC Sec.
- Flat Option Brokerage – These types of brokerage are provided by discount brokers who provide a flat brokerage irrespective of the volume/number of lots you purchase per trade. With them, if you buy 10 lots of NIFTY, they will charge you a flat brokerage of Rs 20 per trade which is almost a saving of 90% of brokerage and a breakeven in this case will be less than 1 point of the NIFTY. These brokerages provide their services online and hence able to keep their brokerage low. Some of the major discount brokers operating in India are Zerodha and RKSV.
- Unlimited Trading plan for Options – Some of the discount brokers in India have a monthly unlimited trading plan which provide unlimited trading for a fixed monthly charge. In case you trade a lot in options, this could be a good plan for you as you don’t have to worry about brokerage once you have paid the monthly charge. The rate for this plan varies among brokers and can be anywhere from Rs 2,000 per month to Rs 4,000 per month. Remember that this would be profitable for only those who trade multiple times in a day and do more than 200 trades in a month. Some of the major discount brokers in this space are TradeSmartOnline and RKSV.
Also remember that brokerage is just one aspect of the charges but there are some other government charges which would also be due to you. Apart from this, there would be an extra 14% service tax on the brokerage. So in case of full service broker, on a brokerage of Rs 950, there would be an extra service tax of almost Rs 130. While the same service tax from a discount broker would charge around Rs 2.
One more thing to keep in mind if you are a professional option broker will be the trading platform provided by your broker. Even if you have to pay something extra for that, you should be able to make that in profit. Most of the full service broker will provide you a good trading platform with charting facility and some of the discount broker like Zerodha also provide an excellent trading platform in Zerodha Pi which helps you to trade with Charts and even right your own Algo to generate alerts for trading.
In the end, I would just advise you to read a review about all the main brokers in India and choose which best fits your needs. It is really difficult to change your brokers once you have started trading with them. And for someone in Option trading, it make further more sense to choose a broker which have a low brokerage rate and good software to support their trading.