For a category 3 AIF how is exposure calculated when buying options?

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AIF category 3 -F&O Margin allowed?

As per the SEBI Circular (CIR/IMD/DF/10/2013) - 3.4 Prudential requirements All Category III AIFs which undertake leverage, whether through investment in derivatives or by borrowing or by any other means shall comply with the following prudential requirements:      i. For the purpose of arriving at leverage undertaken by an AIF, leverage shall be calculated as the ratio of the exposure to the Net Asset Value of the AIF.      ii. Leverage shall be calculated as under:        Leverage =Total…

@Prayag

Calculation of exposure and NAV

i. The total exposure of the fund for the purpose of computing leverage shall generally be the sum of the market value of all the securities/ contracts held by the fund. The total exposure at any point of time will be a sum of exposure through instruments in both the spot market and the derivative market.

ii. Exposure shall generally be calculated as below:

1. Futures (long and short)= Futures Price * Lot Size * Number of Contracts
2. Options bought= Option Premium Paid * Lot Size * Number of Contracts
3. Options sold= Market price of underlying * Lot size * Number of Contracts
4. In case of any other derivative exposure, the exposure is proposed to be calculated as the notional market value of the contract