Can I take F&O hedged positions without the margin benefit amount in my account?

I have added several future and option positions to span calculator. It says I receive a margin benefit of 191k and that I only require a total margin of 40k to take all of these positions.

Can I take all of these positions with just 40k in my account?

Will I also receive this premium amount of 3.4k with just 40k in my account?

Hello,

You’ll require to have the total margin of 40k as well as the margin benefit amount of 191k in your account to take all of these positions. In total, you will require 231k in your trading account while entering these positions.

Span margin is calculated over your entire portfolio of positions. While taking a new position, you’ll require to have the entire margin for it in your trading account. The system will not be aware of what positions you already have. If this position results in a spread benefit and/or span benefit in your portfolio of positions, the benefit amount is credited back to your trading account.

At the end of you adding all of your above mentioned positions to your portfolio, the total margin blocked in your account by the exchange will only be 40k and the margin benefit amount of 191k would’ve been credited back to your trading account. You can then take new positions with this margin benefit amount.
You will also receive a premium for all your option sell positions which can also be used for new positions.

Please note, as you add and remove positions from your portfolio, your span margin will change accordingly. If there is a deficit of funds, you will have to bring in this money to hold all your positions. Else, appropriate positions will be squared off by the auto-square off system to make do these deficit of funds.

Read more about spread benefit and span benefit here:

1 Like