STT hike: Why derivative traders will dump futures for options

Subscribe to enjoy similar stories. The proposed increase in the securities transaction tax (STT) on derivatives from the next fiscal could drive a shift in trading from futures to options, where the hike in the levy is comparatively lower, experts said. This could partly offset the estimated 10-15% dent in derivative volumes, according to some of them.

The STT on futures was increased in Budget 2026 by 150% to 0.05% and that on options by 50% to 0.15%. However, the STT on futures has a bigger impact because it is calculated on the notional or total contract turnover. In options, the tax is calculated on the premium turnover, which is the actual traded value and therefore tends to be less than the notional turnover.

Analysts and brokers estimate that the increase in the cost of trading options will be way lower than that for trading futures. This could make jobbers and scalpers, who take frequent positional trades during the day and operate on wafer-thin margins, to shift from futures to options. HDFC Securities calculates that STT comprises about 10% of the cost of trading options compared with 84% of the cost of trading futures.

"The doubling in the trading cost of futures could push some jobbers and scalpers to options, where they can trade synthetic futures through options, where the increase in overall cost of trading will be around 3-5% only," said Amit Chandra, VP (research) at HDFC Securities. Options have a larger share of the trading pie than futures and so the hit to the overall derivatives turnover would be 10-15%, said Rajesh Palviya, head of research (derivatives & technical) at Axis Securities. Options accounted for 75% of the National Stock Exchange’s transaction income of ₹2,760 crore in Q2 of the