Hi!
While going to short call option the required margin shows very less than the actual one as calculated by Zerodha Margin Calculator. However, for selling put option it shows huge margin (may be the actual required margin) during placing order. I’m a bit confused. Whether there is any technical glitz while placing selling order of call, or any leverage is acting here to bring down the margin level. So far I know that for delivery option there is no leverage from Zerodha. Would be grateful if I am enlighten in this regard. Thanks.
Tapastanay.
Did you have any long ce open position?
There is no that much difference between the margins.
If possible requesting you the link/screenshot where you encountered that
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Thank you Sunleel-ji for replying. As asked, I don’t have any long CE open position on Nifty now. Only one short PE open position is there. I’m attaching 4 screen shots of Nifty 6 Aug Option on two different strike prices, say 10550 and 11550 for both CE and PE selling. Kindly look how much differences on requirement of margin between PE and CE. Please have a look and enlighten me on this. Thank you and best of regards.
Tapasatanay.
As you has 1 pe short you are enjoying margin benefit for that.
Use margin calculator for better understanding of margins.
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Thanks again. However, I failed to understand how my 10550 PE short position is going to reduce my unlimited risk of losing money if market goes higher than my 11550 CE short position. I have read Varsity a number of times and there is no words to express enough my gratitude to Zerodha team and @Kartik ji for wit-full replies. As mentioned, I have checked Margin calculator for checking approx margin. And noticing the huge differences I brought this to your notice. I know, if there is any Long Position open it limits the loss of any Short position of the respective option (CE/PE). Nevertheless, how any short position can cap the risk taken by Shorting another option ( to the very limited extend of premium can only), is a very hazy to me… Could you explain a little to understand your point better. Awaiting your kind clarification. Regards.
refresh some parameters and then recalculate the margins required it will get fixed, showing 1.8l here for ce option.
You will get margin benefit for Shorting CE if you have Shorted PE earlier but margin requirement for Shorting CE won’t come down by this extent.
Why don’t you raise ticket at support.zerodha.com, our team will take look at it and fix if there is any issue.
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Thanks. Can you please provide more details on which parameters to be refreshed… I have checked it for several times for a couple of days and it shows the same result. It always differs from the figure of margin calculator. And it is not in line with the clarification of @Suneel1 ji. I want to get a clear picture on this confusing matter. If anyone from Zerodha (@nithin ji, @kartiks ji or any other knowledgeable person) clears my confusion would be more appreciating. My regards.
Tapasatanay
Thanks for your knowledge. As advised, I’ll take the matter to Support team of Zerodha. What I understand now, that actually the margin cannot be reduced upto this level. There must be some issue on Kite. I wanted to get knowledge whether any leverage for option delivery is plays here a role… BTW to get confidence, is there any leverage provided for option selling for Delivery (like Intraday)?
Waiting to hear from you.
Thank again.
No, there is no leverage offered for overnight positions in Options.
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Thanks… Wishing the whole Zerodha community to be the best in term of insight full discussions.
Logic behind this margin benefit is-
You are taking opposite naked position so (CE for naked PE).Risk will be on one of the either legs.you won’t loose money on both legs.
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Thanks a lot for clearing my doubts. Later I could manage to find out this logic that the risk of unlimited loss always remains in any single direction, hence margin benefits comes into the process. Anyway, your reply increases my confidence.
One more query Sir, if I write any option in MIS on expiry day, then I could avail the margin benefit for intraday which is lower than Normal Delivery. In that case, could I be allowed to let my position expire at 3.30 pm or I have to square up my position by 3.20 pm as per the standard rule of Zerodha for Intraday trading. Will be obliged for your answers. Regards.
Tapasatanay
You can’t leave your MIS position to expire, it will be squared-off by RMS team at 3:25 pm.
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Thanks for your knowledge.
In continuation… In case of Option Wrting in MIS on the day of Expiry…
Q1. In case I couldn’t not square of my position before 3.25 pm, then RMS will do the job and charge Rs 50… Right?
Q2. In worst case, due to illiquidity if my position couldn’t be squared off even by RMS, what will happen then? Will zerodha charge any penalty? Will Exchange slap any penalties…if yes then how much? Kindly enlighten me…
Regards.
Yes, auto square-off will be charged Rs. 50 + GST.
If RMS fails to square-off, What happens upon Expiry, depends on whether it is Index Option (Cash Settled) or Stock Option (Physically Settled).
Index Options: If your Option is OTM it will expire worthless, If it is ITM, Exchange will settle it at Intrinsic Value, any profit / loss will be credited to / debited from your account. Also, Long ITM Options will accure additional STT of 0.125% on Intrinsic Value of the Option, no additional STT on Short Options as STT is already paid when you sell.
Stock Options: If your Option expires OTM, it will expire worthless. If it expires ITM, depending on your position you will be obliged to receive shares or deliver shares of the Underlying stock.
Failing to maintain adequate funds to receive shares or not having underlying shares in your Demat to deliver on expiry will attract penalties, suggest you to read this post for better understanding.
In this scenario, my position will be considered to Exchange as good as normal expiry of a NRML type Option. But, since my position is MIS type and after failing to square off it even by RMS, what will Zerodha do? Is Zerodha going to charge Rs 50+ even then (though it didn’t square off it)? Or any kind of charges or procedure would be applied. Kindly clarify… Btw… I have read the policy you so kindly suggested for me, I’m obliged for that. Thanks again.
No squareoff charges in this case.