Suppose, i have Sold BANKNIFTY 31000CE position and it is hedged with a Buy of 31500CE. On expiry day Spot price is 30000 and i am sure that it won’t reach 30700. Since the hedged position has some preium left, i would like to exit the Buy 31000CE position, to avoid losing on the hedge. In that case, margin requirement will increase substantially. If i am out of that excess margin requirement and since its expiry,
Would there be any penalties for the margin shortfall on expiry day?
Doing this won’t be a good idea now as there are Peak Margin rules applicable, which means Clearing Corporation will take snapshots of your positions at random times throughout the day to check whether there is sufficient margin maintained for the trade, shortfall in the margin will result in peak margin penalty. You can learn more about this here.
The penalty is similar to what exchange charges for margin shortfall for overnight positions, you can learn more about this here.
If you want to exit your position, ideally now you should first exit Short position and then square-off Long position if you don’t have additional free cash.