Auto square off clarification


#1

Suppose I held an option short position today and tomorrow my position is in negative and my margin shows negative by some amount say -3k …then will my short position be automatically square off at 3.30 the day when margin showing -ve or the next day at the opening of market hour…
@nithin @Bhuvanesh
Pls throw some light and clarify…
I tried to call customer service but they told that the system may square off but I need clear reply will the system automatically square off or if it does when before 3.30 or the next day morning or what -ve margin percentage promt the system to automatically square off the position…
If it does automatically square off a position then what is the logic behind interest on margin shortfall…


#2

Since you have an option short position, there won’t be a daily marked to market loss(MtoM), however, as your position turns into a loss, the margin required for the option contract will go up. Exchange releases SPAN margins 4 times during the day and due to the increase, your free cash will become negative and your position will be squared-off after providing a margin call to add more funds to your account.


#3

@MohammedFaisal
4 times in a day means …please elaborate with exact time of the day.
@nithin


#4

Missed to include the timings.

The exchange releases the SPAN margin files at around 11:00, 12:30, 14:00 and 15:30 during the day. We update the same within 30 minutes of receiving the files.


#5

How does unrealised profit or loss affect margin in case of short options?


#6

@MohammedFaisal
If in the case of margin shortfall, held position is automatically square off…then why margin shortfall penalty is charged when position is automatically squared off … seems funny or I missed something


#7

While our RMS team tries to square-off all positions without adequate margins, adverse movements in the contract during market close could result in the position being left open, in which case, the exchange levies a margin shortfall penalty.