Bull call spread margin required confused?

#1

Assuming that I have 40,000 cash available for fno
To buy bull call spread margin require is 38216 (buy 10300ce and sell 10500ce) as shown in Zerodha margin calculation so my question is can I buy BCS
Or first I have to 60,000 cash available bcoz if I sell ce that requires 60000Uploading…

#2

Selling 1 lot Nifty 10500CE requires a margin of 52k and you receive a premium of 5.5k. Buying Nifty 10300CE requires a premium of 11k.
So the margin required in your account before taking the position is 52k + 11k - 5.5k = 57.5k.

The entire amount of 57.5k has to be there in your account for you to be able to take these positions. Once both the positions are taken, the margin benefit will be calculated by the span system and the margin benefit amount will be released back into your account.

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#3

How long will it take for the span system to release the margin benefit?

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#4

It will be instant after both the positions are executed.

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#5

It’s mean first i have to pay full require amount then I get margin benefits example
Buy ce10200(margin) =75*141=10575
Sell ce10400(margin) =52000
Total amount to take positions =62575
After that I will get margin benefits

#6

this margin requirement is ridiculous. As you see the risk of losing is only 75*200 = 15000 (MAX)… when why the heck it demands 62k margin

#7

Agree. @nithin can you help us understand the margin requirement here? I am sorry I have not tried this by myself.

When the maximum potential loss is limited, why would broker expect a full margin while initiating bull put spreads?

#8
#9

Thanks @nithin. I understand the execution risk which makes Zerodha to require (almost) full margin. Can Zerodha take it up as enhancement to treat the spread orders as one order to force execution of both orders? The reason this is coming up is because traders look into US counterparts where brokers require very minimal collateral for spread orders.

#10

https://zerodha.com/margin-calculator/SPAN/ , so the SPAN calculation is designed by CME (Chicago mercantile exchange). Almost all exchanges use SPAN to calculate margins. So this is what is required wherever you trade.
In India we have an additional exposure margin which SEBI asks to be put, but that we can’t do anything about.

#11

Bull call spreads are an options strategy that involves purchasing call options at a specific strike price ,while also writing the same number of calls on the same asset and expiration date but at a higher strike price. A bull call spread is used when a moderate rise in the price of the underlying asset is expected.