I don’t think anything is actionable for Zerodha here. It is up to the clearing corporation, exchanges, and SEBI to define a framework for this, which the brokers can follow. Zerodha cannot on its own decide to charge lower margin because the user holds the underlying in a call sell.
Yes, this is absolutely correct. There is no role of Zerodha here. It’s about clearing corporation. So, you can not expect any flag or etc from Zerodha.
Not true, Shoonya doesn’t require maintaining cash margin for covered call if POA is linked and there are sufficient shares in demat.
I think the limitations at Zerodha and other brokers are due to how their RMS is structured and the additional regulatory complexity, not due to a regulatory obstacle. Zerodha FAQ admits as much:
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@nithin I am not sure if it is SEBI mandated OR difficult to do changes to Zerodha RMS… could you please let us know your thoughts?
Do check if they’re pledging shares held in demat, and then providing margins against such collateral for your short option position.
Cross margining benefit offered by the CCs are only available till the time that the settlement is completed. For example - If you buy Reliance equity on Monday, and have RIL short future position on the same day, you are entitled to get cross margin benefit. Once the Reliance have been credited to your demat, the cross margining benefit goes away and you’ll need to have full margins for your Reliance short future position. In essence, cross margining benefit is only for one day and is not available if shares are held in demat account
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I am not sure why Indian brokers are not taking this issue up. In USA, covered call is very easy, my brother does it every week on his holdings through Robinhood.
Things work differently there, In US there is no concept of central depository like cdsl or nsdl etc, shares sit with broker and on brokers name, so a broker can decide. Also all trades won’t happen at exchanges, broker can be a counter party or broker can send orders to any market maker or dark pools thus they have more advantage in customizing everything. Said that let me ask our team if we can at least approach exchanges on this.
No, shares will be under client name only, said that you will get margin for pledging and you can use that to write a call, 50% still has to come from cash or liquid collateral though.
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Great, thanks!
I have some stocks ; pledged them ; Covered calls went ITM
What should I do on expiry.
- Nothing from my side right ? shares would be automatically unpledged ?
- What if I have some positions (next month) using money from pledging stocks. What would happen to those on expiry ?
@Meher_Smaran @siva
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If your DDPI/POA is enabled, The unpledging process is taken care of by Zerodha.
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If it is a non-POA/DDPI client, the Client needs to authorize Tpin to debit shares for payin
However, if there is any shortage of funds, you need to add the funds to your account, otherwise, there is a chance of squaring up the next month’s contracts.
Next day after expiry, If you have enough margin for open positions, It is fine. Otherwise, we shall close them.
I would receive funds from my stocks the next day (day after expiry) right ?
If there is enough liquidity, I would suggest you to manually close the call and sell stock before 3:30. This way you can save the brokerage cost as well.
Strike price plus value of value shouldn’t be more than 0.25% spot price.
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Why there is Shortfall Penalty ;
Even though strike is ITM I have the stocks in DEMAT
Could someone confirm ?
@Jason_Castelino @Meher_Smaran
Stock options are bit confusing , this month is the first month I am trying these
I used all the cash in some other trades.
I do have 10 other covered calls all of which are in ITM as of now
Please confirm if penalty is applicable ?
Hi @dtyxg , while the holdings are available, yu still need to maintain the exchange required margin. If there’s a shortfall, you might incur a margin penalty.
Also, I’ve sent yu a DM.
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