In case I have inadequate margin in my trading account and have multiple put/call short options positions at different strikes, which ones are auto-squared off in case of inadequate margin? Does Zerodha follow any set rules for the same (e.g. position with highest loss will be squared off first), or will all the positions be auto-squared off?
No set rules as such, but if both calls and put shorts are there then RMS will try to reduce on both sides, but nothing is guaranteed, I would strictly recommend user to take care of their positions and either make sure enough margins are available if not at-least reduce positions so that RMS would not act.
Thanks for the clarification. Further questions -
(1) If I have adequate margin at start of day, but the short positions start loosing money and I go out-of-margin, when is auto-square off triggerred? Is it done only towards the end of day, meaning between around 3-3:30 PM or anytime?
(2) If I have sufficient margin at the end of day as per closing price/volatility, what are the reasons I may fall short of margin even before start of trading next day? In case I don’t bring-in additional amount the next day, when will Zerodha square-off position in that case? Towards end of trading or anytime before that?
(3) If I have a stop-loss order on a short position, and before the stop loss is triggered, margin call is triggered and position is auto-squared off by Zerodha-RM, what happens to my stop-loss order? Is it still valid after auto-square off?
Following link has tentative actions taken by Zerodha-RM, can you clearly specify under what circumstances there is only margin penalty imposed, and under what circumstances positions are auto-squared off?
"The new SEBI circular and the NSE circular mandates brokers to collect the complete SPAN + Exposure margin, as opposed to only SPAN margin, to carry forward Futures and Options positions to the next day. Check out this post on TradingQ&A for more information.
If you do not have the full margin required to carry forward the position(which can be found using the margin calculator), you will be charged margin penalty by the exchange and your position may be squared off by our RMS team."
I apologize if these are already answered on Zerodha support portal, but I am unable to find these answers in margin policy page.
As soon as the margin shortfall is triggered, you will receive an SMS/Email asking you to add funds. The position will be squared-off anytime during the day. This would depend on various factors such as volatile markets, volatility in the scrip you are trading, etc.
You would comply with the margin requirement as per the 4th intraday SPAN file(Updated at 2.30 PM). However, the exchange publishes an End of Day SPAN file at 5 PM. This is the file used for margin block for the next day. So if there is an increase in margins between both the files, you will have a shortfall in margins.
Same as 1st question
We will first cancel the pending order and then square-off the position. If the position is being squared-off partially, we’ll modify the stoploss order to the quantity left open.
Thanks for the clarifications on square-off.
Does the margin penalty apply in this case for the shortfall in margin to carry over position overnight?
What are other scenarios where margin penalty comes into picture?
Yes, if you are short of margins as per the EOD SPAN+Exposure file, there will be a penalty on the amount you are short of.
Penalty is applicable for the shortage amount as below:
|Short collection for each client||Penalty percentage|
|(< Rs 1 lakh) And (< 10% of applicable margin)||0.5%|
|(= Rs 1 lakh) Or (= 10% of applicable margin)||1.0%|
If RMS acts and my position is sqarued off automatically, will there be any margin penalty. The trade is intraday only.