How is buy average calculated for F&O trades?
If the same contract is traded multiple times, the average price of the positions may change. The buy average for F&O positions is calculated using the FIFO (First In, First Out) method, regardless of the product type used to close the positions (MIS or NRML).
Since all trades must use the FIFO method, it's best to use the same method to calculate the P&L when filing income tax returns. Please consult a CA before deviating from the FIFO method used on Kite and Console.
Let’s consider the following trades to understand FIFO:
| Date | Symbol | Trade Type | Quantity | Rate (₹) |
| 06th Aug |
NIFTY18AUGFUT
|
Buy | 75 | 11000 |
| 07th Aug |
NIFTY18AUGFUT
|
Buy | 75 | 11100 |
|
07th Aug
|
NIFTY18AUGFUT
|
Sell | 75 | 11050 |
In the above case, the buy trade executed on 06th August will be the open quantity at the end of the day; hence, the average price of the open quantity on 07th August will be ₹11100. This logic does not change regardless of the product type used (NRML/MIS) for the trades on 07th August.
The P&L will show a booked profit of ₹3750 [i.e. (11050-11000)*75], and the position will show the difference between the current market price and ₹11100 as the gain/loss for the open position. The same FIFO logic is applicable for both carried forward (NRML) and intra-day (MIS) trades. However, MIS positions can only be exited using MIS product type, and the same goes for NRML. An NRML position cannot be exited using MIS product type and vice versa.
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