I HAVE TWO DOUBTS 1. If i hold ITM stock option in the expiry week huge margin will be there because of physical settlement right? if i hold hedged position like debit or credit spread with ITM option , is there any issue ? do i need to add more fund to hold it till expiry please clarify 2. Almost same question but in future . Future contract also need high margin in the expiry week . if i hedged current month future contract with OPTION or Next month contract then what will be the margin . same margin or hedged positions also need the expiry week high margin
This is how it works on last two days of Expiry Week.
Eg. You hold Short ITM 1800 Call and Long OTM 1880 Call of Reliance, current margin requirements for Shorting 1800CE are 271k and after buying 1880CE it comes down to 70k giving you margin benefit of 200k.
On last two days of Expiry Week, margin requirement for ITM 1800CE will be twice of 271k ie. 542k, after factoring in 200k margin benefit you get for holding OTM 1880CE your margin requirement will be 542k - 200k = 342k.
The calculation is same for Futures as well.
Eg. To hold Long Reliance Futures you require 255k margin, which reduces to 32.7k if you buy protective Put 1860PE giving you margin benefit of 221k.
On last two days of Expiry Week, margin requirement for Futures will increase to twice of 255k to 510k after factoring in margin benefit of 221k for holding protective Put, your margin requirement will be 510k - 221k = 289k.
Stock Futures and Options are compulsory physically settled, although there are scenarios in which net-off happens and there is no physical delivery, read this linked post to know more.