Ask Me Anything about the new margin framework for F&O: by Sensibull

AMA (Ask Me Anything)
1

Hello there,

NSE has substantially slashed the margins needed for hedged strategies in what is going to be one of the most monumental moments in the history of Options Trading in India. Here is a video we made to help you understand the new margins better

You can read more in the NSE presentation here
https://bit.ly/3gEA9u5

Here are the key points:

  1. There is not much of a change for margins of futures
  2. There is no change in the margins for Long Call and Long Put as they are premium paid buy positions and margins do not apply there
  3. There is no reduction in the margins for Short Call and Short Put. In fact, this has slightly gone up
  4. There is a huge reduction in the margin for all hedged strategies with limited losses. These are Spreads, butterflies, condors, etc
  5. There is a reduction in the margin for straddles and strangles as well
  6. If you buy protective hedges for futures, margins will go down nearly 80%. That is, buy a put for protecting a future buy and buy a call for protecting a future sell.

There is as much as 80% drop in the margin for hedged strategies. This move will help move the option buying crowd to an option selling crowd. This will also incentivize sellers to buy protection and convert their naked sold positions to hedged strategies.

We love this move by the NSE and the regulators. This will help reduce the risk in the system, protect the capital of the retail investor, and give rise to a new class of traders who trade with calculated risks.

11 Likes
6

Hi how the calander spread margin will be calculated

7

If i have to hedge the position then How can we place multileg order in kite app.?

1 Like
8

How it affects the OI data reading ?? Like maX put OI and call OI strikes were acts like a boundaries , now do we see more strikes having same OI to confuse the retailers

2 Likes
9

Sir could you please explain how to take advantage of bear call spread given the margin have reduced now? I am just confused whether at the time of selling a call I would require more than 1 lac margin. However once I buy another call the margin will reduce. This is for a bear call spread strategy.

10

@siva-reddy @Sensibull Hi, I have subscribed to Sensibull pro version. I would like to hedge my monthly expiry sell option by buying weekly options. When will i have to refill my weekly options. Every Wednesday or every Thursday by end of day will do.

11

Yes how can we buy???

12

Does this new margin system apply to stock options as well?

13

With new Margin, can we take positional spreads ?

I.e with 35K capital can I take positional on debit or credit spread ?

Can I trade future expiry contracts using new Margin ? Ie aug or sep expiry

Thank you

14

Signficant reduction, again. F&O margin calculator - Zerodha Margin Calculator

15

Buy leg first

16

Yes to spreads. Also ye to futures if you hedge

17

Absolutely yes

18

Any views regarding impact on option premium?

19

Either is fine

20

Buy the protection call first, and then sell the lower call. This will reduce margin to 35k

21

This remains to be seen. My hunch is, nothing will change much.

1 Like
22

Has Sensibull updated these changes in their Strategy builder?

23

Yes. We fetch this from Zerodha straight away. There is a small glitch in debit spread. That will be corrected shortly

24

So in sensibull, for credit spread if I first write buy order and then in second line I write sell order, then it will get executed on reduced margin, there is no need to have full margin. Right?