How is buy average calculated for F&O trades?

When trading the same contract multiple times, we calculate the buy average for F&O positions using the FIFO (First In, First Out) method, regardless of the product type (MIS or Normal) used to close the positions. This consistency is crucial for accurate P&L calculation when filing income tax returns.

To illustrate the FIFO method, let’s take an example:

Date Symbol Trade Type Qty Rate (₹)
18/04/2024 NIFTY25APRFUT Buy 50 22100
19/04/2024 NIFTY25APRFUT Buy 50 21900
19/04/2024 NIFTY25APRFUT Sell 50 22150

In this case, the buy trade on 18/04/2024 becomes the open quantity on 19/04/2024, resulting in an average price of ₹22100 begining of day on 19/04/2024. At End of day on 19/04/2024 the P&L will show a booked profit of ₹2500[(22150-22100)*50], and the open position of 50 will have the average price of ₹21900 and the unrealised P&L will reflect the difference between the current market price and ₹21900.

Remember, the FIFO logic applies to both carried forward (Normal) and intra-day (MIS) trades.