How is buy average calculated for F&O trades?
If you trade in the same contract multiple times, you will notice the present average price of your positions changes. As in the case of equity delivery trades, the buy average for F&O positions is calculated on a pure FIFO (First In First Out) basis.
You are required to use a consistent method to report the P&L in your income tax returns. Since the FIFO method is compulsory for equity delivery trades, it's best to use the same method to compute your P&L from all your stock market activity. Please consult your CA before deviating from the FIFO method which is used on Kite and Console.
Let’s consider the following trades to understand FIFO:
In the above case, the buy trade executed on 07/08/2018 will be the open quantity at the end of the day hence, the average price of the open quantity on 08/08/2018 will be Rs. 11100. Irrespective of the product type used (NRML/MIS) for the trades on 07/08/2018, this logic does not change.
Your P&L will show a booked profit of Rs 3750 [i.e. (11050-11000)*75] and your position will show the difference between the current market price and Rs 11100 as your gain/loss for your open position.
The same FIFO logic is applicable for both carried forward and intra-day trades.