Can anybody explain the new 20% sale proceeds block rule?

F&O
1

Does this rule apply to sale proceeds from selling naked options?
Here’s how I understand it.
I buy ₹ 1,00,000 options and then sell them for ₹ 1,00,000.
Now I can buy ₹ 80,000 options and sell them for ₹ 80,000.
Now I can buy ₹ 64,000 options and sell them for ₹ 64,000.

Is this how it goes? Assuming all those trades are made in a single trade day?

I’m new to trading and yes I have read the original article regarding this rule and new margin rules and have also read replies thereon but I couldn’t find anything related to naked options where no margin is provided the broker.

2

Pankaj, the premium you will receive from Selling Options can only be used to take Long Option positions in the same segment on T Day, from the next trading day onwards you can use it wherever you want.

The entire SPAN + Exposure margin released from squaring-off your Futures position or Short Option position can be used immediately to take another trade without any restrictions.

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3

Adding to shubh, 20% sale proceeds blocking on T day is only for equities sold from holding and not for fno.

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4

Thank you for reply.

the premium you will receive from Selling Options can only be used to take Long Option positions in the same segment on T Day

Is this only applicable when I sell options that I do not have i.e where leverage is provided by the broker or is it also applicable when I first purchase options using actual funds in my account and then square that position by selling those options?

Since no leverage is provided by broker in buying options, proceeds received from closing that position should be available for taking any other trade. Is that correct?

5

This will be applicable even if you are squaring-off your Long Option position, on T Day the premium received can be used only for taking Long Option in same segment, from next day onwards you can use it wherever you want.

If you are doing intraday trading then the proceeds received from squaring-off your Long position can be used for taking other trades as well.

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6

Thanks @ShubhS9 and @siva for entertaining this beginner and also for the quick, to-the-point replies. You guys rock!

7

Just confirming …margin released from option selling square off - can be used immediately to buy new stocks correct? (i.e same day) @ShubhS9 @siva

8

Yes if that margin is released for short options, for long option square off you can’t use that money on same day except to buy another options.

9

Need little clarification … lets say I bought option that needed 75k and if I square off same day with a profit of 2k i.e I sell that option for 77k -
So I can not use that entire 77k for any other purpose other than buying another option or just that 2k profit I can not use and wait for another day i.e. until T+1 day?

10

Only the proceeds i.e. 2k you can not use the same day, the rest you can use as you wish.

11

You mean only the profit ?

12

Yes, 2k is profit only right?

13

Still little confused. If I buy options today with cash and square off … lets say in an hour with profit …

  1. I can use that profit on T+1 day for any trades either in equity or fno correct?
  2. But principal amount can be used on same day for any segment without any restriction?
14

Yes , you are asking the same thing again and again.

15

I am trying to make sure …because I have got confusing answers.