Recently i learned covered call option, where we can use our holding instead of paying margin. Now the new problem is that I am trading using zerodha broker. I came to know they do not provide this option for covered call. If i hold shares then too i have to pay margin. Can you please help me know the list of brokers who provide covered call option features.
Is this type of margin benefit referred to as cross margin benefit by the exchanges?
I did come across Cross Margining page on the NSE website and it specifically mentioned about options positions being not considered for the cross margin benefit (Referenced below). Is that the reason why such a benefit cannot be provided to customers or is there some other reason?
If this is a rule set by the exchanges, then does no broker in India allow margin benefit for covered calls without pledging shares first?
Cross margining is available across Cash and F&O segment and to all categories of market participants. The positions of clients in both the Cash and F&O segments to the extent they offset each other are being considered for the purpose of cross margining as per the following priority
Index futures and constituent stock futures in F&O segment
Index futures and constituent stock positions in Cash segment
Stock futures in F&O segment and stock positions in Cash segment
In order to extend the cross margin benefit as per (a) and (b) above, the basket of constituent stock futures/ stock positions should be a complete replica of the index futures. NSE Clearing specifies the number of units of the constituent stocks/ stock futures required in the basket to be considered as a complete replica of the index on the website of the exchange (www.nseindia.com/NSCCL/Notification) from time to time.
The number of units are changed only in case of change in share capital of the constituent stock due to corporate action or issue of additional share capital or change in the constituents of the index.
The positions in F&O segment for the stock futures and index futures should be in the same expiry month to be eligible for cross margining benefit.
The position in a security is considered only once for providing cross margining benefit. E.g. Positions in Stock Futures of security ‘A’ used to set-off against index futures positions will not be considered again if there is an off-setting positions in the security ‘A’ in Cash segment.
Thank you for answering. Pledging will work on this instance. For e.g. lot size of x shares is 1000 shares and i am holding same shares of 1000qty. If i will pledge it to call sell same stock. Where current strike price is 100rs. If i will call sell 120rs within 15days stock price moves to 130rs. In this situation, does zerodha provides option to give back my shares to protect those loss. So that i will get profit 20*1000 qty plus premium
Yes you can unpledge your shares, but if you want to continue holding the Short Call Option, you will have to make sufficient funds available in your account as margin recieved from pledging these shares will no more be there after you unpledge.