Trading in Futures and Options but confused about Turnover calculation?
Futures and options are derivatives that derive their value from an underlying asset. While the future is a contract to buy or sell on a future date, the options allow an investor to protect his investment against changing prices.
Turnover basically means the total sales made by a person in a particular time frame. Turnover is calculated to get a brief idea of the business and if turnover exceeds certain threshold limits in a year then tax audit is also applicable.
Unlike a regular business, Futures and options are settled by paying the differential amounts without the actual delivery. Though the contract note is issued at the full value of the underlying asset, the turnover is calculated for the differential amount. The total of Absolute Profit and loss is considered as the turnover of Futures and Options trading.
Let’s take an example and calculate the turnover of Future Contracts.
In the above case, though there is a loss of ₹2,00,000, for the purpose of calculating turnover the negative is ignored and the loss is added to profits.
Now, let’s see how the Options turnover is calculated.
In the above case also the negatives of losses are ignored for calculating turnover and are added to profit.
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