How is my average rate calculated for F&O?
First In First Out (FIFO) is a method used while calculating the average rate for trades in equity, commodity, and currency derivatives.
Under this method, securities purchased first are sold first.
For example, Mr Raj has traded in BANKNIFTY options as given below:
| Date | Buy/Sell | Lots | Rate | Value |
|---|---|---|---|---|
| Jan 1st | Buy | 5 | Rs. 200 | Rs. 25,000 |
| Jan 10th | Buy | 5 | Rs. 220 | Rs. 27,500 |
| Total | 10 | Avg: Rs. 210 ((52,500 / 25) / 10) | Rs. 52,500 |
- On Jan 14th, he buys 1 lot at Rs. 240 per lot and sells 2 lots at Rs. 250 per lot:
| Date | Buy/Sell | Lots | Rate | Value |
|---|---|---|---|---|
| Jan 14th | Buy | 1 | Rs. 240 | Rs. 6,000 |
| Jan 14th | Sell | 2 | Rs. 250 | Rs. 12,500 |
- Based on the FIFO principle, the 2 lots sold will be taken from the 5 purchased on Jan 1st.
- The P&L for the Period Statement will show a booked profit of Rs. 2,500 ((250-200)*2*25)
- The new average rate is calculated as:
| Date | Buy/Sell | Lots | Rate | Value |
|---|---|---|---|---|
| Jan 1st | Buy | 3 (5-2) | Rs. 200 | Rs. 15,000 |
| Jan 10th | Buy | 5 | Rs. 220 | Rs. 27,500 |
| Jan 14th | Buy | 1 | Rs. 240 | Rs. 6,000 |
| Total | 9 | Avg: Rs. 215.5 ((48,500 / 25) / 9) | Rs. 48,500 |
* For F&O trades, the FIFO (First In, First Out) principle is applied for calculating the average rate of both carry forward and intraday positions. Intraday Positions : During the trading day, the weighted average rate is displayed for intraday positions. However, The FIFO-based average rate is updated on our trading platforms at the end of the day. Corporate Action Adjustments: The FIFO rule may vary for contracts affected by dividend adjustments as part of corporate actions. Click here to learn more about the treatment of such contracts.
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