What does Forex Trading cost 2020? Broker fees comparison
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I sold a bunch of US stocks in both my TFSA and RRSP and want to keep the proceeds in USD cause I want to rebuy US stocks in the future and don’t want to pay the forex exchange fees and so on. In the mean time I’d like buy something safe like a USD bond ETF (or possibly a money market fund). Anyone got anything to recommend? Any gotchas I should be aware of?
I’m going to study in Japan in a month’s time. Will someone in Japan answer a few questions?
EDIT: Thanks for everyone who allowed me to pick there brains! I now have a much better idea of what to expect. I have a few (probably very stupid) questions. I’ve already organized VISA and that stuff. I have a lot more questions; here are some from the top of my head: A. Transport
How is the subway system in Tokyo? Can an English person navigate it?
Is it difficult to take busses?
Are Taxis expensive or fairly cheap?
Will I be able to sufficiently travel in Tokyo using only public transport?
B. Banking My problem is that in my country you cannot get a credit card if you do not work (I am still a student). This means that I will go with only my debit card – so every time I withdraw money it will be very expensive. Buying with my debit card will be even more expensive (“transaction fee” - $4 and “forex exchange fee” 1.42% of the amount).
How difficult is it for a foreigner to open a bank account in Japan? Can you do it if you are not a permanent resident?
Can you get things such as VISA/Mastercard credit cards (no transaction fee)?
Are there large banks that can help you in English?
Do they have online banking (in English).
How do you transfer money between my bank account and a Japanese bank account?
C. Phoning and Skype
Will my normal 3G phone work?
Do they have pre-paid SIM cards?
Can you buy a phone without a contract?
Can you phone from Japan (on the Internet with Skype) to a normal phone in my country (South Africa).
How expensive is it?
D. Language I am starting to learn Japanese now and will be on a 6 month intensive Japanese course when I am in Japan. Questions:
How good do they speak English? Will I be able to communicate sufficiently?
Do they understand well? Is it better than China?
If someone has already started learning Japanese, I would like a few tips on how to proceed.
E. Food & Clothes
Is it expensive?
What types of food is easy to prepare for students?
Do they have any large chain supermarkets with reasonable prices?
What type of clothing do they wear? Do students wear suits or jeans?
Are their clothes and shops expensive (should I buy here or there)?
F. Laws & culture
Are there any strange laws that I should know about?
I will add other questions here later. Thanks in advance! EDIT: formatting
[Question] Any clue on how Forex or exchange fee is charged when paying EUR? I am from US, have USD on Card.
Hi, I recently got my Revolut card, I am from US, and I read briefly at https://www.revolut.com/en-US/legal/fees but I got confused little bit, was wondering if anyone can help me? I rent dedicated servers in Europe from Kimsufi (OVH), I pay them in EUR, I usually pay with my Bank of America credit card and it charges me around 2.8%~3% I think (it is my estimate) as Foreign Transaction Fee https://www.valuepenguin.com/credit-card-foreign-transaction-fees Was wondering if paying with Revolut, how much will it cost me in fees. Thanks a ton Have a nice day :-)
Is there a Forex like exchange for bitcoin with no fees (just small spread <1%)?
Throwaway but long-time lurker. I am debating the best way to get bitcoin. I need to purchase approximately 15k USD. I can make a couple trips with Liberty X and get 2k with credit card (store only charges 2%). I'm getting another 3k with Coinbase bank transfer (2%). The rest I am thinking of getting with CEX.io, which only charges 3.5% for credit cards. So 3 questions:
Is there a forex like exchange where I can get bitcoin for USD cash via trading for very low total fees/markup (<1.5%)?
Is there a cheaper service to purchase BTC with credit card outside of Cex.IO and libertyx (their max is 1k a day)?
Is there a trading exchange (options/futures/cfds) where I can sidestep all this and keep the entire trading medium in cash?
01-09 20:22 - 'Is there a Forex like exchange for bitcoin with no fees (just small spread <1%)?' (self.Bitcoin) by /u/bittithrowaway removed from /r/Bitcoin within 0-5min
''' I am debating the best way to get bitcoin. I need to purchase approximately 15k USD. I can make a couple trips with Liberty X and get 2k with credit card (store only charges 2%). I'm getting another 3k with Coinbase bank transfer (2%). The rest I am thinking of getting with CEX.io, which only charges 3.5% for credit cards. So 3 questions:
Is there a forex like exchange where I can get bitcoin for USD cash via trading for very low fees (-1%)?
Is there a cheaper service to purchase BTC with credit card outside of Cex.IO and libertyx (their max is 1k a day)?
Is there a trading exchange (options/futures/cfds) where I can sidestep all this and keep the entire trading medium in cash?
I'm interested in investing in the US stock market but feel safer investing in an index fund rather than in individual stocks. Does anyone have experience investing in USD UITFs with BPI or BDO? Particularly BPI INVEST U.S. EQUITY INDEX FEEDER FUND, which tracks the S&P500.. Is it any different from investing in the PSE index version? I usually subscribe and redeem via the app or the website, is this also possible for the USD UITFs? If I have a USD account, is it as simple as the Peso UITFs?
Ruby Card is pointless for fiat topups in australia.
So i made a post a few weeks back about the top up structure here and it was met with some pretty heavy resistance of people saying there was no fee's for topping up with fiat. I have now received my card and want to inform everyone that there IS TOP UP FEEs at least in australia. There is a 1% fee for using a credit card to top up, so that's 1% cashback gone and then since you can only initially buy the currency in Singapore dollars rather then australian your bank will seem to charge you extra for that too. If i put $100 AUD worth of fiat in my topup for my card, i pay $106.40 and the exchange rate is 102 AUD for $100 SPD. So if i use this for fiat i'm litrally losing money everytime i want to use this, not to mention CRO price is tanking so i'm losing even more money from the cashbacks. This may actually be the most pointless card for the australian market, it's only benefit is to just get it and only use it for spotify rebate. I tried the revolut work around but it doesn't seem to work anymore. HIGHLY DISAPOINTED!!
What am I missing? Wouldn't the cheapest way to buy US shares from Australia be to purchase USD from Interactive Brokers (w flat commission) and then send the USD to a Stake account which then charges a flat $5 deposit fee, after which all trades are free? Or is there something I'm not taking into account?
The Great US Stock Investment Platform Fees Debate (Hatch/Stake/Sharesies) - And why it's very situational and there is never one right answer (but it mostly doesn't matter)
So we see pretty regular posts about Hatch vs Stake (and now vs Sharesies) looking at raw fees and returns. I've made posts in the past about Hatch vs Stake fees but the posts have been specific to just the scenario I have entered in the spreadsheet. There's often a lot of handwaving and speculation about fees and their impact without seemingly providing any math to back up the speculation (common culprits over-exaggerate the impact of the Sharesies annual sub fee). Bring on the latest spreadsheet iteration - You can change your investment amount, frequency, investment horizon and most importantly number of unique transactions/companies per investment (this heavily influences fees for Hatch). The "number of unique transactions/companies per investment" means if you are investing into 3 different index funds or companies every time you transfer money, put "3" in here. This is important because Hatch charges a flat rate for every separate purchase. Modify the blue cells and look at the green cells as the output. There are 3 different Cases so that you can examine the difference in fees unique to your investment strategy. https://drive.google.com/file/d/1JG34jwxa28a8ED-6sqwmDNkWklcaayzC/view Note that Monthly is 30.5 days whereas Fortnightly is 14 days so using Monthly makes you invest slightly less often. What is the takeaway from this? With say 2 or less unique index funds/companies per transaction and a large enough contribution to justify the Hatch flat rate fee (eg say $500 per Transaction), net % fees after withdrawing for all platforms are mostly within 0.5% of each other after withdrawal. So it doesn't really matter what platform you use if your investment strategy is to always buy and hold. If you expect to do ANY form of Rebalancing, active trading etc then you should probably always pick Stake because there is no fee to do this, but there is fees with Hatch and Sharesies for every transactions. Thus, given the relative very small differences in net fees between all platforms, Stake will end up being quite a bit cheaper. IF the transactions are large and infrequent, Hatch's flat USD$3 transaction fee can largely be irrelevant but again since net fees are similar across the board, there isn't really any reason to (from a fees point of view) If you are unsure what your future investment activity might be then you should probably just use Stake based on the previous point to allow for future rebalancing/trading/etc, since base case fees (buy and hold) don't really matter across all platforms. You can skew the returns to be better with Hatch if you invest a lot more money far less frequently, but in doing so you are going against conventional advice of Dollar Cost Averaging and are far more susceptible to market volatility affecting your large, infrequent purchases. The largest impact of investing in US Stocks/Index Funds will be diversification and minimisation of fund fees rather than worrying about which specific platform you're using. We also don't know what the future will bring in terms of future fees of these companies. Given that the volume of customers for all of these platforms is growing significantly in NZ, fees should probably come down over time (Stake already only charge 0.7% to Aussie customers compared to 1% in NZ) so it becomes even harder to predict 5, 10, 20 years down the track. Discussion on any thread related to these platforms often devolves into an argument/discussion about fees but I hope to demonstrate that for the most part, for buy-and-hold index fund investors fees don't really matter (in the grand scheme of things). If you are purchasing individual company stocks you are likely to do trading/rebalancing so Stake is usually better. This is solely looking at this from the point of view of fees, not the actual platform. Discussion around security of these platforms, ease of use, ease of getting company support, etc should be front and centre in these discussions but they rarely are.
Globe: Algonquin Power & Utilities receives big boost to five-year growth plan
https://www.theglobeandmail.com/business/article-algonquin-power-utilities-receives-big-boost-to-five-year-growth/ Canadian utilities with ambitious growth plans have found a new best friend in Zimmer Partners LP, a U.S. hedge fund that is paving the way for new infrastructure by making serious commitments to stock sales. Algonquin Power & Utilities Corp. is the latest domestic player to benefit from founder Stuart Zimmer’s seal of approval. Back in December, the Oakville, Ont.-based company announced a five-year expansion strategy that called for $9.2-billion in spending on projects that include 10 wind and solar facilities in Quebec, Saskatchewan and eight U.S. states. Analysts calculated Algonquin needed to raise $350-million from stock sales each year to achieve its goals, an appetite for capital that didn’t go away when the world caught the novel coronavirus. Enter Mr. Zimmer and his US$9-billion fund, which focuses on investments in energy and utility stocks. In early July, Algonquin landed a $350-million order for its shares from what it described in a press release and filings as a single U.S. institutional investor. Investment bankers working on the transaction confirm the investor was Zimmer Partners; the company and the hedge fund declined to comment. (The Globe and Mail is not identifying the investment bankers as they were not authorized to speak publicly about the deal.) Over three decades of investing in utilities, Mr. Zimmer has earned a reputation as a committed and supportive shareholder. With a large initial order in hand, a team of dealers led by Scotia Capital and CIBC Capital Markets offered an additional $550-million of Algonquin stock to the public. This portion of the bought deal was subsequently boosted to $633-million, on the back of strong demand from individual investors, meaning Algonquin raised a total of $983-million. The company funded roughly three years of its five-year growth plan in one transaction. The deal marked a dramatic debut for new chief executive Arun Banskota, who joined Algonquin as president in February from a U.S. power company and took over as chief executive from founder Ian Robertson in mid-July. In a press release, Mr. Banskota said the stock sale covers all of this year’s spending plans and “puts the company in a position of strength as it looks to soon begin executing on the 2021 portion of its capital program.” The size of the transaction did not go unnoticed on the Street. “Although we were not surprised by the company raising equity at this time, we were not expecting an equity offering of this magnitude,” Nelson Ng, an analyst at RBC Dominion Securities, said in a report. Analysts expressed much the same sentiment back in December, when Fortis Inc. sold $500-million of stock to Zimmer Partners as part of a $1.2-billion share sale, raising cash needed for the Newfoundland-based company’s planned $18.3-billion of projects over the next five years. Zimmer Partners isn’t the only major institution willing to back Canadian infrastructure plays with big dreams. Brookfield Asset Management Inc. recently bought $350-million of preferred shares from Superior Plus Corp., money the propane distributor plans to spend on acquisitions. And a number of pension plans, including the Ontario Municipal Employees Retirement System, Alberta Investment Management Corp. and the Caisse de dépôt et placement du Québec, have made significant investments in publicly traded utilities. Why are Zimmer Partners and other institutions willing to step up? On the surface, Zimmer Partners and public investors paid the same amount for Algonquin stock, buying shares for $17.10 each – the stock was trading at $17.52 prior to announcement of the deal, so all the buyers were getting new shares at a slight discount. Regulatory filings also show Algonquin’s institutional investor agreed to hold its stock for at least 45 days, precluding flipping the stock for a quick profit. However, regulatory filings show Algonquin paid the hedge fund what’s known as a “commitment fee” equal to 2 per cent of the value of the shares it bought, or $7.2-million. Fortis paid a 1-per-cent commitment fee, or $5-million, when it sold shares to Zimmer last year. That small fee is effectively a discount for the institution – similar to buying shares for well below where they are trading – which helps these investors beat their performance benchmarks. From Algonquin’s point of view, the commitment fee is well worth paying, as it is only half the 4-per-cent commission charged by dealers on the bought deal portion of the offering. And it allows an ambitious Canadian utility with a newly minted CEO to plan for growth during a pandemic with almost a billion bucks in the bank.
So I was sitting out on my balcony (in an apartment complex) and out comes my upstairs neighbor. He is conducting an “interview” over FaceTime. The “interviewee” was telling him that he had lost his job due to Covid and has struggled to find employment since. So all of a sudden my neighbor goes “okay so this interview is going to go like this: I am going to tell you a little bit about what we do” and talks about how when you exchange 100 dollars of US money, you get more back when you exchange it for euros. Then he goes on this whole thing about how the Foreign Currency Exchange is a lucrative way to make income—whatever. THEN. he says-another way to earn income is to get other people to join the “group chat” (whatever that means) this man literally says “you can have 12 people under you but you don’t have to sign up those twelve people. You sign up three people and those three people sign up three people.” ThAt Is a PyRaMiD. This poor victim fell for the scam and sent my neighbor 200 dollars and now has to pay 176 a month which I guess goes toward trading? Anyways I did a little digging and it’s a company called Forex and I am fairly certain it is not legal.
Hi, i am 23 right now and have been investing in stocks for a while. I'm currently using DBSV for sg stocks and Saxo for US stocks. Is IBKR better for US stocks in terms of overall fees ( Transaction, exchange rates, etc) if I have less than 100k invested and incur the monthly $10 fee? Really appreciate replies as i'm on a dilemma right now!
Forex trader switching to futures - please help me wrap my head around pricing/fees
I'm a somewhat experienced forex trader but I feel like the advantages of a more tangible/centralized market and volume information are too significant to pass up, so I'm trying to make the switch to trading futures. I have experience charting with Tradingview, so I'm particularly interested in opening an account with AMP and trading through TV, but there seem to be a lot of different fees in futures to consider versus forex, so I'm having a hard time figuring out exactly what it would cost me to trade that way. It's my understanding that if I want to just stick to E-minis, I'd be looking at the $10+1 per month fee for the CME data feed and the commission (plus CQG route fee and exchange fees) per contract per side. Are there any other fees or considerations I'm missing? Is this an adequate setup for trading ES?
Can anyone give me some tips how to cheaply change my home currency (Croatia) to Euros? I am investing in ETFs and I find that this currency conversion is a large expense. I tried transferwise but their rates are the same as my home banks so no luck there.
What is a good trading platform that can also be used in Canada? I currently use wealthsimple but im realizing they dont have very many stocks available to trade and its also delayed by fifteen minutes. I would like to get more serious in to day trading/quick trades. any suggestion or advice would be greatly appreciated. thanks!
Hi everyone, I have come across a question/problem and was hoping someone could provide some clarity. I traveled to Canada last year and was recently going over my Credit Card statements (I know - super late) and noticed that the Currency Exchange rate that I was charged from my bank (Citi) wasn’t a competitive rate at all. In fact, I would have been better off exchanging the money myself at a currency exchange shop. Please keep in mind that my Credit Card is considered a “No Foreign Transaction Fee Credit Cards.” My question: aren’t banks actually making huge profits by offering non-competitive currency exchange rates without the knowledge their card holders? I’m asking this because I believe many people don’t factor the exchange rate into account when applying for a “No Foreign Transaction Fee Credit Cards.” On top of this: there are Credit Cards that people use with a 3% foreign transaction fee + a non-competitive exchange rate. Is this one of the main ways that Credit Card companies make money? I know Capital One offers “No Foreign Transaction Fee Credit Cards” — but there has to be a way they can make some $$$ on this… is it by offering non-competitive exchange rates? Any input would be appreciated — Thank you in advance.
I managed to open a trading account with SBI, set up my bank account to wire money in and out (which hopefully means I'm not Japanese illiterate), and now that I attempt to actually make a trade I am at a loss as to how to actually use the thing. Most of the top level links (the blue ones that stand out the most) pointing to ads, having to peck around for five whole minutes to find the actual page to enter a trade and once there a bunch of acronyms thrown out without any explanation. Also, no way of confirming how much a transaction is expected to cost, including fees, before committing? Last part of the form asks for my transaction password before allowing me to confirm. Are all Japanese brokers this bad? Is this a ploy to confuse people enough that they capitulate and use their consulting services for extra fees? I have bank accounts here and know the local finance industry is, shall we say, technologically challenged, but this is something I was not expecting.
A friend introduced me to forex trading and said that if i invite 3 friends i’ll get into a trading program for free and she’ll teach us how to trade and how she’s a mentor for 70+ people and how the program will put us in video calls with investors that make millions. Idk if it’s a scam one of the people she “mentors” told me about it, she goes to my school is this a pyramid scheme or no ?
ATO Australian tax treatment for options trades 🇦🇺
I am posting this as I hope it will help other Australian options traders trading in US options with their tax treatment for ATO (Australian Tax Office) purposes. The ATO provides very little guidance on tax treatment for options trading and I had to do a lot of digging to get to this point. I welcome any feedback on this post.
The Deloitte Report from 2011
My initial research led me to this comprehensive Deloitte report from 2011 which is hosted on the ASX website. I've been through this document about 20 times and although it's a great report to understand how different scenarios apply, it's still really hard to find out what's changed since 2011. I am mainly relating myself to the scenario of being an individual and non-sole trader (no business set up) for my trading. I think this will apply to many others here too. According to that document, there isn't much guidance on what happens when you're an options premium seller and close positions before they expire. Note that the ATO sometimes uses the term "ETO" (Exchange Traded Option) to discuss what we're talking about here with options trading. Also note: The ATO discusses the separate Capital Gains Tax ("CGT") events that occur in each scenario in some of their documents. A CGT event will then determine what tax treatment gets applied if you don't know much about capital gains in Australia.
ATO Request for Advice
Since the Deloitte report didn't answer my questions, I eventually ended up contacting the ATO with a request for advice and tried to explain my scenario: I'm an Australian resident for tax purposes,I'm trading with tastyworks in $USD, I'm primarily a premium seller and I don't have it set up with any business/company/trust etc. In effect, I have a rough idea that I'm looking at capital gains tax but I wanted to fully understand how it worked. Initially the ATO respondent didn't understand what I was talking about when I said that I was selling a position first and buying it to close. According to the laws, there is no example of this given anywhere because it is always assumed in ATO examples that you buy a position and sell it. Why? I have no idea. I sent a follow up request with even more detail to the ATO. I think (hope) they understood what I meant now after explaining what an options premium seller is!
First, I have to consider translating my $USD to Australian dollars. How do we treat that? FX Translation If the premium from selling the options contract is received in $USD, do I convert it to $AUD on that day it is received? ATO response:
Subsection 960-50(6), Item 5 of the Income Tax Assessment Act 1997 (ITAA 1997) states the amount should be translated at the time of the transaction or event for the purposes of the Capital Gains Tax provisions. For the purpose of granting an option to an entity, the time of the event is when you grant the option (subsection 104-20(2) ITAA 1997).
This is a very detailed response which even refers to the level of which section in the law it is coming from. I now know that I need to translate my trades from $USD to $AUD according to the RBA's translation rates for every single trade. But what about gains or losses on translation? There is one major rule that overrides FX gains and losses after digging deeper. The ATO has a "$250k balance election". This will probably apply to a lot of people trading in balances below $250k a lot of the FX rules don't apply. It states:
However, the $250,000 balance election broadly enables you to disregard certain foreign currency gains and losses on certain foreign currency denominated bank accounts and credit card accounts (called qualifying forex accounts) with balances below a specified limit.
Therefore, I'm all good disregarding FX gains and losses! I just need to ensure I translate my trades on the day they occurred. It's a bit of extra admin to do unfortunately, but it is what it is.
This is the scenario where we SELL a position first, collect premium, and close the position by making an opposite BUY order. Selling a naked PUT, for example. What happens when you open the position? ATO Response:
The option is grantedCGT event D2 happens when a taxpayer grants an option. The time of the event is when the option is granted. The capital gain or loss arising is the difference between the capital proceeds and the expenditure incurred to grant the option.
This seems straight forward. We collect premium and record a capital gain. What happens when you close the position? ATO Response:
Closing out an optionThe establishment of an ETO contract is referred to as opening a position (ASX Explanatory Booklet 'Understanding Options Trading'). A person who writes (sells) a call or put option may close out their position by taking (buying) an identical call or put option in the same series. This is referred to as the close-out of an option or the closing-out of an opening position. CGT event C2 happens when a taxpayer's ownership of an intangible CGT asset ends. Paragraph 104-25(1)(a) of the ITAA 1997 provides that ownership of an intangible CGT asset ends by cancellation, surrender, or release or similar means. CGT event C2 therefore happens to a taxpayer when their position under an ETO is closed out where the close-out results in the cancellation, release or discharge of the ETO. Under subsection 104-25(3) of the ITAA 1997 you make a capital gain from CGT event C2 if the capital proceeds from the ending are more than the assets cost base. You make a capital loss if those capital proceeds are less than the assets reduced cost base. Both CGT events (being D2 upon granting the option and C2 upon adopting the close out position) must be accounted for if applicable to a situation.
My take on this is that the BUY position that cancels out your SELL position will most often simply realise a capital loss (the entire portion of your BUY position). In effect, it 'cancels out' your original premium sold, but it's not recorded that way, it's recorded as two separate CGT events - your capital gain from CGT event D2 (SELL position), then, your capital loss from CGT event C2 (BUY position) is also recorded.In effect, they net each other out, but you don't record them as a 'netted out' number-you record them separately. From what I understand, if you were trading as a sole tradecompany then you would record them as a netted out capital gain or loss, because the trades would be classified as trading stock but not in our case here as an individual person trading options. The example I've written below should hopefully make that clearer. EXAMPLE: Trade on 1 July 2020: Open position
SELL -1 SPY 85 PUT, exp 30 August 2020
Collect Premium USD$1 per unit, and brokerage USD$5
= USD$100 premium collected, minus USD$5
= Net amount of USD$95 collected
FX Translation rate on the date of the trade: AUD $1.00 = $USD 0.70
Net Premium Collected in $AUD
= USD$95 x (1/.7)
CGT Event D2 triggered and a capital gain of $135.71 is recorded
Trade on 15 July 2020: Close position
BUY 1 SPY 85 PUT, exp 30 August 2020
Pay Premium $0.50 per unit, and brokerage $5
= $50 premium paid, plus $5
= Net amount of USD$55 paid
FX Translation rate on the date of the trade: AUD $1.00 = $USD 0.60
Net Premium Collected in $AUD
= USD$55 x (1/.6)
CGT Event C2 triggered and a capital loss of $91.66 is recorded
We can see from this simple example that even though you made a gain on those trades, you still have to record the transactions separately, as first a gain, then as a loss. Note that it is not just a matter of netting off the value of the net profit collected and converting the profit to $AUD because the exchange rate will be different on the date of the opening trade and on the date of the closing trade we have to record them separately. What if you don't close the position and the options are exercised? ATO Response:
The option is granted and then the option is exercisedUnder subsection 104-40(5) of the Income Tax Assessment Act 1997 (ITAA 1997) the capital gain or loss from the CGT event D2 is disregarded if the option is exercised. Subsection 134-1(1), item 1, of the ITAA 1997 refers to the consequences for the grantor of the exercise of the option. Where the option binds the grantor to dispose of a CGT asset section 116-65 of the ITAA 1997 applies to the transaction. Subsection 116-65(2) of the ITAA 1997 provides that the capital proceeds from the grant or disposal of the shares (CGT asset) include any payment received for granting the option. The disposal of the shares is a CGT event A1 which occurs under subsection 104-10(3) of the ITAA 1997 when the contract for disposal is entered into. You would still make a capital gain at the happening of the CGT event D2 in the year the event occurs (the time the option is granted). That capital gain is disregarded when the option is exercised. Where the option is exercised in the subsequent tax year, the CGT event D2 gain is disregarded at that point. An amendment may be necessary to remove the gain previously included in taxable income for the year in which the CGT event D2 occurred.
This scenario is pretty unlikely - for me personally I never hold positions to expiration, but it is nice to know what happens with the tax treatment if it ultimately does come to that.
What about the scenario when you want to BUY some options first, then SELL that position and close it later? Buying a CALL, for example. This case is what the ATO originally thought my request was about before I clarified with them. They stated:
When you buy an ETO, you acquire an asset (the ETO) for the amount paid for it (that is, the premium) plus any additional costs such as brokerage fees and the Australian Clearing House (ACH) fee. These costs together form the cost base of the ETO (section 109-5 of the ITAA 1997). On the close out of the position, you make a capital gain or loss equal to the difference between the cost base of the ETO and the amount received on its expiry or termination (subsection 104-25(3) of the ITAA 1997). The capital gain or loss is calculated on each parcel of options.
So it seems it is far easier to record debit trades for tax purposes. It is easier for the tax office to see that you open a position by buying it, and close it by selling it. And in that case you net off the total after selling it. This is very similar to a trading shares and the CGT treatment is in effect very similar (the main difference is that it is not coming under CGT event A1 because there is no asset to dispose of, like in a shares or property trade).
Other ATO Info (FYI)
The ATO also referred me to the following documents. They relate to some 'decisions' that they made from super funds but the same principles apply to individuals they said.
The ATO’s Interpretative Decision in relation to the tax treatment of premiums payable and receivable for exchange traded options can be found on the links below. Please note that the interpretative decisions below are in relation to self-managed superannuation funds but the same principles would apply in your situation [as an individual taxpayer, not as a super fund].
Key quote from this decision: CGT Event D2will apply on the writing of an ETO by the Fund. The Fund as grantor of the option will make a capital gain (or loss) of the difference between the capital proceeds (that is, the premium receivable) and the cost of granting the option (for example, brokerage fees) at the time the option is granted
My take on this is that you will realise a capital gain on issuing of the selling position. I don't see how you could realise a capital loss in that scenario? Or maybe if you sell a position and the brokerage is so high that it outweighs the premium received (a dumb trade) then that would be a capital loss (a rare scenario).
Key quote from decision: When the Fund opens a position by buying an ETO, no immediate taxation consequences arise.CGT Event C2will happen to the Fund when its position under an ETO is closed out where the close-out results in the cancellation, release or discharge of the ETO
Don't forget to declare your trades on your tax return and keep a nice spreadsheet
Keep track of the exchange rates for each day you make a trade. You could do as you go and check the RBA exchange rates website for the daily number, or just do it all at once at the end of the financial year
Finally - I recommend ensuring that you save a portion of your income to pay the capital gains tax at the end of the year so you don't have to withdraw it from your portfolio and pay exchange rate fees to convert it back to Australian dollars. It will depend on your marginal tax rate what that percentage will work out to be in the end.
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