Yes, add 2% of contract value( lot size * price) to existing margin for index futures as mentioned in circular.
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I believe this is a direct hit on the many Option Selling based PMS services cropping up with 10Lakhs as the entry capital. Now they hv to arrange 15Lakhs as capital…
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Some information about why they have applied extra margins.
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Waiting on some more clarity from the exchanges on this. Will share details when we have it.
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As per this video, the Premiums of the options would increase and volatility would also increase because of increased margin !
They say that they observed this phenomenon in case of some stocks where the margins increased and physical settlement was happening.
If that is the case, then this is a relief for options sellers. But I wonder how far this phenomenon will work for Index options !
Any expert or experienced traders… please share your thoughts on this !
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If margin increased then most of the small traders will be option buyer instead of option seller due to huge margin requirement…if buyers are more then there will be increase in price…simple
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Price will increase even if most of the option buyers buy puts?
Price of the option
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@DA6704 … thanks for your input.
As per the Video mentioned above, the explanation they are giving is that sellers will demand a proportionately higher premium to justify the returns for the risk that they would be taking.
This part seems clear to me.
However, they are saying that volatility will also increase. This part is where I am not sure. Ofcourse, if an option is expensive, the volatility has to go up logically.
However, I am finding it hard to imagine a broadbased index like Nifty getting volatile just because the exposure margins are going up.
Hope everyone is able to understand my doubt.
Even if they buy puts, I am guessing that the price of calls should also proportionately go up, even though they may still be cheaper than the puts.
If they buy puts, then puts will become expensive, hence there will be a set of traders who will write the puts and buy the calls (thereby creating a long position), and pocket some premium.
Hence the price of calls will also go up due to sufficient buyers.
Please feel free to correct my logic in case I am wrong.
This is just my understanding, hence I could be wrong.
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i don’t understand why dosen’t SEBi completely close the leverage thing .Just close it even for day trading forget carryover…there will be nothing like leverage in indian markets .if one has to trade Bank nifty bring in the whole capital to trade ,lets say bank nifty is at 28000 so for 1 lot -bring 1120000 rs=28000x40 and if one wants to carry forward then bring 25 times the amount i,e 2.8 crore, seriously enough of these chuti**pa.
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@Vandana1
The Additional Survillance margin is + 2% for Nifty and Bank Nifty.
@Anil30
If the strike is within 5% of last closing price then
The Additional Survillance margin 4% [on total contract] applied to Index options.
This is huge as 5% of 11700 => 585 pt so, 11700-12250 all ITM. OTM strike starts from 12300 [2%], u can see it is illiquid enough. So, all the liquid strikes are ITM => 4%
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This is reality. Current IV of different strikes depends on demand supply.
You can watch and see different strikes of Bank Nifty Weekly Options moves differently with different volatility. Price in reality don’t follow option calculator exactly. Short term demand supply is the king.
If there is not enough seller or seller are demanding higher premium due to higher ASM then buyers have to pay much higher price during momentum.
During momentum when there is high demand from option buyers premium will increase rapidly but very quickly we will see premium drop due to IV drop. Option buyers will lose more in such cases.
Making money for option buyers is going to be more difficult.
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Dear @Akkki,
Thanks for the detailed clarification… very much appreciated.
I will revert back in case I have more questions.
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ASM wala na???
Aggreee with you…(y)
My humble heartfelt request to all in the trading community, it’s true that unless u feel the burn urself u never understand what pain of burning is. I would always say why these common businessman are all the time slamming modi government and saying that they are anti common man, and now i understand, these sebi people will allow innocent people to trade on 10 times 50 times margin and loose all, or allow them to buy non sense shares in the name of multibaggers and pay 10 times taxes, but won’t allow brilliant option selling brains to work on hedging strategies, all cause they don’t want anyone but huge capitalists to earn.
Please do not vote for bjp and let others to understand what nonsense these guys are doing.
Only NOTA and nothing else. Lets teach these buggers a lesson.
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What the hell are you talking about ? lol…
She is just asking a basic question. If you can’t give a straightforward answer then move on man.
Price will increase even if most of the option buyers buy puts?
Yes or No. Simple question.
Lol. I don’t see any reason why would SEBI take us because of this question. lol 
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The main concern is that people are still not sure about How this ASM will be calculated esp when its being slammed right in our face just like that !!
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Yes Manish Bhai ur right …it is all happening due to frustation. Anyway story if someones feelings hurts by ME.
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I don’t understand why the cnbc awaaz video says that futures traders profits will be less??
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