F&O Margin Selling Requirement

[Chaitanya_Kumar]

I was looking forward to selling JUN PE monthly options.
I observed that the margin required for selling JUN 20500 PE option (12,258/-) is lower than JUN 20000 PE option (17,812/-). As far as i know, margin requirement for option selling is based on IV, premium, days to expiry and number of strikes away from underlying.
The closer the strike is to the underlying, higher should be the premium requirement.
But in the above case, its the complete opposite.
Why is it so ?

[Meher_Smaran]

Hi @Chaitanya_Kumar

Explained here

How is the margin updated?

Hi @Roy As per rules stipulated by the exchange, An extra 3% extreme loss margin is applied for those deep OTM contracts which are more than 10% away from the previous day closing price of the underlying. Hence, Selling 17000 PE would require higher margin than say, 17500 PE which is still within 10% from previous day’s close. [image(1)]

[Chaitanya_Kumar]

Is the 3% extreme loss margin on the strikes that are more than 10% away from previous day closing is applicable on the index or on the future of the index ?

[Meher_Smaran]

Previous closing price of the underlying i.e., Spot

[Chaitanya_Kumar]

ok. Thank you very much.