How is buy average calculated for F&O trades?

Understanding Average Price & FIFO Method in F&O

When the same contract is bought or sold multiple times, the average price of the open position may vary. In Futures & Options (F&O), all positions are calculated using the FIFO (First In, First Out) method.

This method is applied uniformly across all trading platforms, including Carbon, regardless of whether trades are executed using:

• MIS (Intraday)
• NRML (Carry Forward)

Why FIFO Matters

Since FIFO is the standard method used by exchanges and trading platforms, it is recommended to follow the same approach while calculating Profit & Loss (P&L) for income tax purposes.

However, you should always consult a Chartered Accountant (CA) before adopting any alternative calculation method.

Example

• 10th Sept: Buy 50 units at ₹45,200
• 11th Sept: Buy 50 units at ₹45,500
• 11th Sept: Sell 50 units at ₹45,400

FIFO Adjustment:

• The first buy (₹45,200) is matched with the sell (₹45,400)

Booked Profit:

= (₹45,400 − ₹45,200) × 50

= ₹10,000

Remaining Position:

• 50 units bought at ₹45,500 remain open
• This price becomes the average buy price for the open position

Important Points

• FIFO logic applies to both MIS and NRML trades
• MIS positions must be squared off using MIS orders only
• NRML positions must be closed using NRML orders only
• Switching between product types while closing a position will be treated as two separate positions