As we know, Zerodha prohibits the purchase of out-of-the-money (OTM) options due to broker OI limits. However, they do permit users to hedge their short positions. In their blog post, Zerodha states, “Long positions are permitted within any range as long as their count matches the short futures or options position one holds.”
However, a flaw exists in this logic when a user holds long futures through options (synthetic futures). To create synthetic futures, users take X quantity of long Calls and X quantity of short Puts, resulting in an equal count. Despite this equal count, the position holds unlimited risk. To hedge against this risk, I aim to purchase OTM puts, but your system doesn’t allow this as it counts both long and short options together.
The system should ideally match the count of the same type of options (either calls or puts), not across both call and put options.
Is it possible to fix this, please?
@Nitin