I understand in futures m2m loss has to paid daily and that is why you need to have cash balance in your account. (collateral cash will not work I think - please correct me if am wrong @ShubhS9)
But when we have sold option (either call or put) and it goes against our view …i.e. M2M loss for that day - what happens to that loss ? I mean like futures we don’t have to pay daily that I know…not sure if we need to do anything for that m2m loss?
I think it will increase margin requirement so if we don’t have sufficient margin than we might get exchange penalty and possibly interest charge from Zerodha because at least 50% cash collateral is required? @Vij@TradeB2B@ShubhS9
Yes, there was no MTM loss if you have a call or put short positions. Margin requirement may go up based on the volatility which may lead to penalty if the required margin was not available in the account.
No, whenever you didn’t maintain the exchange required margin for holding the position overnight you will get a margin penalty.
If you are using collateral margin and not maintaining a 50:50 ratio of cash and non-cash component for holding the position overnight (or) your account is in debit due to MTM obligation you will get interest chargeable at 0.05% per day on the outstanding amount.
Question : I have ( NIFTY 13000 PE , 27-MAY , BUY POSITION ) for hedging purpose , what happen if market crashes during this month am i able to close the position or i got stuck due to illiquity , circuits or some other reason.
Maybe illiquity does not happen because it is index option and monthly expiry also.
Marking to market or mark to market (M2M ) is a simple accounting procedure which involves adjusting the profit or loss you have made for the day and entitling you the same. As long as you hold the futures contract, M2M is applicable.