F&O Options - MTM Margin requirements

F&O
1

For MTM Margin requirements do we free cash in account or is it enough to have it in cash component which we use already for span margin requirements

Eg - Cash component - Liquid Bees - 2L pledged
Sold options - Margin used 1.5L
MTM margin (Loss) - 20K

Below questions

  1. So have 50K remaining in the 2L cash component & MTM loss is 20K then we need not load our account with 20K free cash?

  2. Until all the 50K gets covered the positions will not closed by the broker?

  3. At expiry if we have free cash (by loading) then it will be cash settled else it will recovered by diluting the pledged securities by the broker?

Note - This is the pledged cash component.

3

As long as you’re maintaining sufficient margin your position will not be squared-off, the available margin can be in form of collateral as well. However, any loss you make will need to be settled from cash balance only, else your account will result in a debit balance. If you fail to add funds then your pledged securities will be squared-off to the extent of the debit balance, you can check out this post for more details:

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4

@ShubhS9 When the pledged securities are squared off - On expiry day - Can I add funds after 3:30pm market close based on the loss?

Till then it is only necessary to make sure both MTM loss & Span/Exposure margins for F&O is covered by my pledged securities rt?

5

Yes, you can add funds after market close.

For Options, right. But as Futures are marked-to-market, means any profit or loss you make is settled and credited to/debited from your account on the same day. So you will have to maintain cash in your account to settle the loss in Futures position.

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