The costs that show up on the statement
Four explicit charges apply to a listed options trade in India. None of them is large on its own. The problem is that they are charged per leg and per order, so they multiply on exactly the strategies traders like most — multi-leg, high-frequency, small-edge.
- STT (Securities Transaction Tax) — charged on the sell side of options, as a percentage of the premium. It scales with how rich the option is, and it is per leg. (The rate was raised in October 2024; check the current number before you rely on it.)
- Brokerage + 18% GST — at a discount broker, a flat fee per order (commonly around ₹20), not per trade. GST of 18% sits on top of brokerage and exchange charges.
- Exchange transaction charges — a small percentage of turnover (premium), levied by NSE/BSE per side. Different across the two exchanges.
- SEBI turnover fee + stamp duty — a token SEBI fee per crore of turnover, plus stamp duty on the buy side. Individually rounding errors; collectively part of the drag.
The exact rates change — the budget moves STT, brokers change plans. The structure is what matters and it doesn't change: sell-side STT on premium, brokerage per order, GST on top, per leg.
The two costs that never show up
The charges above are on your contract note. The two largest costs for many strategies are not — because they aren't fees, they're the market.
Slippage is the gap between the price you see and the price you get. You buy at the ask, you sell at the bid, and the difference is the spread. A backtest that fills at the last traded price, or the mid, is crediting you a price no live order receives. On a liquid at-the-money NIFTY strike the spread is a rupee or two; three strikes out, on a quiet afternoon, it can be many times that — and it is worst at exactly the moments you most want out.
Impact cost is slippage's bigger sibling: when your order is large relative to what's resting on the book, you move the price against yourself as you fill. It is small on index ATM options and punishing on far strikes and single stocks — the illiquid corners where attractive-looking backtest edges tend to hide.
A worked example: the four-leg trap
Take an iron condor on NIFTY — four legs. You sell two, buy two to cap the risk. To open and then close it is eight orders. Walk the costs:
- Brokerage: 8 orders × ~₹20 = ~₹160, plus 18% GST on that.
- STT: charged on the sell legs' premium, every round trip — and it grows with the premium you collect.
- Exchange + SEBI + stamp: a percentage of turnover across all eight orders.
- Slippage: the spread paid on eight fills, not one — and condors are usually built on the less-liquid wings.
A backtest that charges one flat brokerage per trade and fills at the mid can easily under-count the real cost of that condor by an order of magnitude. On a strategy whose edge is a few hundred rupees a week, that isn't a rounding error — it is the entire result.
Why this is the cost that flips verdicts
Costs don't just shave a good strategy's return; they change the answer. A short strangle that looks like a comfortable winner on gross P&L can be break-even after per-leg STT and slippage, and a loser once impact cost on the wings is honest. The equity curve barely changes shape — it just sits lower — which is precisely why costs are the lie that survives longest. Nobody deletes a strategy because the curve looks slightly less steep.
A checklist you can run today
Before you trust any options backtest — yours or anyone's:
- Is there a cost line at all? No charges shown means the number is gross. Treat it as an upper bound.
- Is brokerage per order or per trade? Per trade badly under-counts multi-leg structures.
- Is STT on the sell side, on premium, per leg? A single round-number cost usually isn't.
- Is there a slippage assumption — and is it wider on far strikes? A flat, tiny slippage is optimism, not modelling.
- Re-read the return net of all of it. If the edge doesn't survive costs, it was never an edge.
Where this is built in
Every Algoshastra backtest applies the Indian cost stack by default — STT on the sell side, brokerage per order, exchange charges, GST and a slippage assumption — and itemises them, so you can see brokerage being paid eight times on a four-leg structure rather than once. You describe a strategy in plain English, it runs on real NIFTY/SENSEX per-strike data, and the verdict you get is net of costs — including, often, the honest verdict that the gross edge doesn't survive them. The related read on the other way small samples fool you is why 77% over 31 trades means almost nothing, and the four structural biases are in the honest backtest guide.
Common questions
How much does one options trade cost in India?
There is no single figure — it depends on the premium, the number of legs and how many orders you place. But the components are fixed: STT (charged on the sell side of options, on the premium), brokerage (a flat fee per order at discount brokers, commonly around ₹20), exchange transaction charges, an 18% GST on brokerage plus exchange charges, a SEBI turnover fee, stamp duty on the buy side, and — outside the statement entirely — slippage and impact cost. A single-leg trade might cost a few tens of rupees in explicit charges; a four-leg structure entered and exited pays many of these several times over.
Is brokerage charged per trade or per order?
Per order, not per trade. At a flat-fee discount broker, each leg you place is a separate order and carries its own brokerage. A four-leg iron condor entered and then squared off is up to eight orders — so a '₹20 brokerage' strategy can pay ₹160 in brokerage per round trip before any other cost. Backtests that apply one brokerage charge per trade understate this badly for multi-leg strategies.
What is slippage and why isn't it in my backtest?
Slippage is the gap between the price you see and the price you actually get — you buy at the ask and sell at the bid, and on a fast or illiquid strike that spread is wide. Most backtests fill at the last traded price or the mid, which no real order gets, so they quietly credit you a price that wasn't available. Slippage isn't a published rate; it depends on the strike's liquidity and the moment you trade, which is exactly why it's the cost most often left out.
Do backtests include STT, brokerage and slippage?
Many do not, or include only some. A backtest that omits costs reports gross P&L, which flatters every strategy and flatters high-frequency, multi-leg and small-edge strategies the most. Before trusting a result, confirm it applies STT, brokerage per order, exchange charges, GST and a slippage assumption — and states them. If the cost model isn't shown, treat the headline return as an upper bound, not a forecast.
Read next
The honest frame
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Backtested results are hypothetical, do not represent actual trading, and are not indicative of future results. This article is educational and is not investment advice or a recommendation; Algoshastra is a strategy-building and testing tool, not a registered investment adviser or research analyst. Past or backtested performance does not guarantee future returns.