Changes in margin requirements from 1st Sep, 2020

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125

Hi Zerodha teaam,

I have gone through all conersation and that made me confused in new FNO margin policy by SEBI.

  1. If I took futures postition on Monday and close my postion for profit on the same day, I can use the profit only after settlemt i.e on Wednesday bcz settlement happens on Tuesday evening. I’m I Right?

  2. 100% Overnight future postion sell proceeds can be used to take new equity, futures & options long/sell position right?

  3. If I’m long in option contract and closed the same on the same day. the sell proceedings can be used to take only Long options. Can’t short options or take equity shares or currencies. Is it right?

If i’m right when can i use the money to trade other segments? is it on wednesday or tuesday?

  1. What happens when I have shorted options and closed it on next day… What all I can trade on T day?

These points were already explained but reading all in different phases got confused. So please help me here with your reply

126

You can use the profit the next day.

Yes.

If you close your Long Option position on the same day. you can use those funds to trade in any segment, however you won’t be able to use profits you have made on the same day.

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Margins released from the square-off of the Short Options position can be used to trade in any segment.

127

Thanks Mr. Shubham for quick reply.

So

  1. When Im in Long in option and closed on the same day. with the sell proceedings I can take ONLY long option postion.

  2. When I carry forwared long option contract and closed on the next day. with the sell proceding I can take ONLY long option postion. Same as Long option Intraday trade.

  3. 100% Option writting intraday proceeding can be used to take any postion. i.e Equity delivery/Intraday, futures and options long/short

  4. 100% Option writting overnight proceeding can be used to take any postion. i.e Equity delivery/Intraday, futures and options long/short…

In simple terms what happens when Im in Long option Intraday & Overnight

What happens When im in short options intraday & Overnight.

128

I have 10000 shares of x in my holdings. Today I have sold 5000 shares and then bought back same 5000 shares.

Do I require any margin for this activity. In case yes then how to calculate and can I transfer that amount to zerodha now to avoid penalty.

In case I sell and but same share in same qualtiy multiple times in a day then how to calculate margin.

Thanks.

129

If you close your Long Option position on the same day. you can use those funds to trade in any segment, however you won’t be able to use profits you have made on the same day.

When you carry forward your Long Option position and square if off, the proceeds received can only be used to take a Long Option position in the same segment.

Right. As I said above, the margins released from the square-off of Short Options position can be used to trade in any segment.

130

This is normal Intraday trade, you don’t require any additional margins for this activity.

When you Sell shares from your holdings using CNC, you don’t need any margin.

If you are selling using MIS, you can see margin requirements on Order Window itself.

Untitled

131

Hi Shubham,

Thanks again for the quick reply

Why there is difference in upfront margin utilization for squareoff proceedings for long and short Option position.

  1. Why is that when Im Long in overnight option, I can do take only long option contract in same segment?

  2. But when Im in short option intrday/Overnight, I can use square off proceeding to trade in any segment.

132

When you buy an Option, you are paying premium, this is outflow from your account. So when you square-off, this needs to be settled.

When you Short an Option, there is SPAN + Exposure margin blocked by exchange, when you square-off your position this is released immediately in your account and doesn’t need any settlement.

1 Like
133

Thanks Mr.Shubash for responding and clearing the doubts. :+1:

134

Hi Subham,

I have cleared my doubts but then I have gone through this article.

Can I use the Options premium received to open new F&O positions?

The settlement cycle of F&O is T+1. If you have sold options, the premium amount will be realized on T+1 day.

The premium received from selling options once received will be considered as part of your free cash and may be utilized to make trades in Eq and F&O.

However, on T day i.e the day you sold the option contract, this amount will not be considered as margin as it’s not realised. So, if you open an F&O position, with the option premium, you will be charged exchange penalty. If you purchase equity (CNC), you will only be able to purchase after consideration of the applicable haircut value.

Let’s understand this with examples,

Case 1 -

You have sold Options and received a premium of Rs 1 lac. Assuming you have ₹ 50,000 apart from this in your account, you bought 2 lots of NIFTY FUT in NRML at 1,20,000. Since the premium is not yet realised, while reporting your margins to the exchange, we’ll not be allowed to report the option premium value. So you will be charged margin penalty on the shortfall amount of ₹ 70,000 (1.2 lacs - 50k)

Case 2 -

You have sold Options and received a premium of Rs 1 lac. Assuming you want to buy 100 shares of Reliance at 1000. You will only be allowed to buy the quantity after the applicable haircut. Let’s say the Haircut % on reliance is 12.5%. So, you will be allowed to purchase 87 shares of reliance (1,00,000 - 12.5% / 1000)

Is this is an updated article?? If so, You have informed me that we can take only long option contract after we have squarredoff our overnight long position. Then how

Please explain

135

@ShubhS9 Please explain

136

The article isn’t updated, will update it :slightly_smiling_face:

137

one more short quarry.

While there be any panality imposed on margin utilization for the new Fut/option- long/short position taken using overnight short option contract squared off margin.

Ex - I have shorted XYZcompany CE by paying SPAN + Exposure of 2L. on next day I squared of the position for no loss/No profit… Will there be any margin panality if I dont have any free case and utilized the squareoff proceeding 2L for XYZ FUT on the same day?

138

As I said above, you can use the SPAN + Exposure margin released from square-off of your Short Option / Futures position immediately to trade in any segment. There will be no penalties.

139

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Please clarify

140

Suppose you have squared-off your overnight Long Options position or taken a Short Position, the credit you will receive can only be used to take a Long Options position in the same segment, you will not be able to use this to take a position in Futures or Short Options, for all other trades you can use these funds from the next day only.

141

But above you have informed that

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142

This is margin which is blocked when you take Futures trade or Short Option, when you exit your position, you can use this immediately.

144

@nithin @ShubhS9 @siva-reddy

Never checked but curious so asking …

Intraday etc is fine.

But in delivery trades if a person buy 10 shares 10 times in a day via separate orders vs all 100 shares in 1 go … Does charges has any difference or remain same for both cases ?.. Here i am specifically for other charges and not the brokerage which remain 0.01 for delivery anyways.

145

There won’t be any difference, you can use the Brokerage Calculator and check out.