The margin requirement will be the same as it is for selling an option. You can check the margin requirements here or on the order window on Kite.
The margin you receive from pledging underlying shares will depend on the haircut value of the shares. You can check the haircut for all the securities here.
Thanks Shubh for your reply.
Could you please tell me the procedure to pledge underlying share in order to execute covered call option
Thanks
My knowledge is limited. What I see I understand better. Well I also understand what I am explained 
As of today the 20th of Jan 24 I hold upwards of 4200 shares of ICICI Bank. Having written calls for 4200 shares @ 1070 CE Feb at say 15 the CE has jumped to 18.45 and my account shows a loss of say ~13000 then going by the volatility of CE 1070 if call is well, deep in the money before expiry then how is my underlying protecting me ? What if there is a margin call trigger and I keep pumping money (not sure about this particular point) ? Well what is my equity holding good for ? Why wonât it be squared off at source ? My holdings are in the same Zerodha account. Why isnât there an auto cover without involving money. My share is capping my risk how (and upside beyond 1070) ? Why will I not receive an assignment notice or an early assignment notice (if there is such a thing in nse - I donât know) and the settlement is done automatically - option premium + capped upside @1070 (minus my underlying purchase price) x number of shares.The losses shown as 13000 today and maybe 60000 (or however high the number is) in case the underlying is at say 1130 is a wrong representation. If there is no assignment notice from the broker relayed via exchange then what is my supposed âcovered callâ good for ? The mechanism explained by others in response to Mr Bhushan may work well for pure options trading but not for someone looking to protect his underlying through option / call writing with a margin for profit baked in case of an upward price movement. Option premium linked P&L is options âTradingâ and not a P&L linked to âcovered callsâ.
I am a learner so please correct me if I am wrong. Add to my knowledge.
Youâve mentioned some good points which the OP wasnât factoring in his posts atleastâŚ
Covered Call is just a strategy, exchange and brokerage rules are not made keeping strategies in mind but stability of the overall system alsoâŚ
For e.g. What if this budget day there is another Sitaraman Candle type announcements and everything shoots up 10-20% and the option greeks/high IVs kick in and the Call option prices just sky rocket and one is sitting on a huge MTM loss much more that the amount of shares held in account⌠Thatâs where I think the 50% cash collateral requirement comes in so that the trades/losses can be settled etc etc.
Zerodha team/experts pls correct me if I am wrong 
@Bhushan_Nikhar Any breakthrough here? @nithin does Zerodhaâs product team have this in roadmap to make options (covered) more efficient? I also hold lots and lots of stock but need to have margin for every covered call which is absolutely inefficient to trade and makes no sense.
To add: other brokers are the same, does no one understand covered calls?
You can pledge your same stocks to get upto 50% margin. The good thing is that if your covered call gets ITM during expiry, your pledged shares will be delivered to the counterparty, as long as you have debit instruction correctly set up.
Do you mean DDPI enabled or something else?
Yes, either DDPI enabled or you need to authorize your debits on expiry day if your covered call expires ITM.
@dcd I have a partially covered call with Rel (184 shares in demat vs 250 lot size). If it expires ITM, will 66 shares be purchased or a full lot will be purchased for shortfall?
As much as Iâm aware, your holdings (whether pledged or not) will definitely be considered to meet the physical delivery requirement, and only the shortfall will be purchased from auction markets etc. But I will suggest you not to let it go to auction (it is quite costly) and purchase any remaining shares from the market on expiry day itself just before 3:30 pm
Great suggestion, thank you!
Bhushan, you are 101% correct technically. When a person is holding shares, then why additional margin is required which is around 20% initially and increase to 40% in last few days of expiry. And further as per NSE rule, 50% of margin should be cash, which means in last few days one need 20% cash in addition to holding, which is absurd and beyond logic. At present there is no difference in selling naked call and selling covered call. There should be simple tick options while selling call that it is naked or covered and accordingly margin to be applied or holding to be blocked. For covered call, no margin is required as there is no risk as holding is available and can be blocked.
OK. One question from what I understand from the above discussion. The sold call option is treated naked. So, do we need to maintain additional margin to compensate MTM losses ?? Letâs say the underlying price increases drastically say by 20%, the MTM loss will be huge.
@ShubhS9 can you answer this ?
Hi @Santhosh9
Thatâs correct. As the option, till it is exercised, is treated as a naked position and would require margin to fund MTM losses.
I wanted to share this idea.
There must be an indicator (âCovered Callâ) in Kite so that you can select your existing holding for covered calls. For example, select 1 lot (150 shares) of LTIM-EQ and the user flags it for a covered call. Just like with e-dis you can mark a stock for sale. Why not mark a stock for a covered call?
As long as the âCovered Callâ indicator is active, Kite should not block additional margin for selling the covered call option.
If the user would like to convert the covered call to a naked short call, then they must maintain the required margin and disable the covered call flag. But, it is wrong to penalize investors by treating margin money for covered calls and that for naked short calls the same way.
Besides, it seems illogical to keep feeding margin money for covered calls in a crazy bull market. Iâm aware of the 50% cash component requirement. But, this should not be needed when you already have the stock holding before selling the covered call. All the system needs is a way to flag that the held shares are intended for a covered call so that no additional margin money is required.
Thoughts?
I completely agree with your suggestion about implementing a âCovered Callâ indicator in Kite. It makes perfect sense to allow investors to flag their existing holdings for covered calls, just like how e-DIS allows marking a stock for sale. This would streamline the process and eliminate the unfair burden of treating covered calls the same way as naked short calls in terms of margin requirements.
Covered calls, by nature, are much less risky since the investor already holds the underlying stock, and thereâs no justification for blocking additional margin as if it were a naked position. The suggestion of converting a covered call to a naked short call with appropriate margin requirements, when the user disables the flag, is practical and would provide the flexibility traders need.
Additionally, similar logic should apply to cash-secured puts, particularly in volatile or crashed markets. Blocking funds for a cash-secured put, when the seller has sufficient cash or short-term investments to cover the potential obligation, could protect put sellers from being forced to liquidate positions unnecessarily. In extreme market conditions, having such a flag or indicator would ensure more efficient margin management and protect sellers from excessive capital being tied up.
This solution could provide a more dynamic and logical margin system, protecting both covered call sellers and cash-secured put sellers from undue financial strain.
Agree with you @Jayadratha . Hope the flag gets implemented soon by Zerodha and other brokers.
For a cash secured put though, I donât think the flag indicator is needed. This is because the required margin cannot go beyond the cash needed for delivery of the stock and as traders we can handle it by ensuring we have enough cash to take delivery if the need arises.
The problem is with covered calls which go deep ITM in bull markets like weâre witnessing now. The margin requirement shoots up like anything even though the stock holding (against which the call is sold) would have significantly gained to offset the loss in the call option position.
I donât understand what the broker risks are for deep ITM call option. As a covered call option writer whoâs holding the underlying my and consequently my brokerâs obligation is only to deliver those shares to option buyer who has exercised their option to buy the shares at the call price. Whether the call option is deep ITM or not shouldnât be a factor in delivering shares below CMP, that is the risk I take by writing covered calls.
Spot on @pavinjoseph. There must be a way to distinguish between a naked short call and a covered call. As of now there is no such distinction. The flagging mechanism I suggested above to indicate a part of your holdings are allocated for covered calls should help to solve this problem.