How Daily MTM in options writing works?

General
1

I have short an OTM option of a stock 270 PE one lot 2000 qty at 6.75 rupees. (when stock was trading at 282)

While shorting margin blocked is around 42000.

Now its been few days and the option price is now close to 10 rupees and the price of the stock is around 275 rupees.

Today also the margin blocked seems close to 43000. (when calculated with span calculator, and my limits view margin blocked)

So my questions are

  • Even if current price moves close to 15 or something, will the margin blocked would be similar, 42k to 45 k range? Would the current price of option wont affect the SPAN adn exposure margins?
  • Whatever total margin I see everyday in the span calculator, will that same amount be blocked for that day for holding that sell of put option? If it is so can I keep the option with me for whole month by just letting 50000 lying in my account?
  • If the current price moves below 270 (option becomes in the money), will my total margin blocked will increase drastically?
  • I have received 6750 as premium, is it already added to my account balance and is withdrawable or not?
2
  • Margins will go up, but  in case of option writing, the margin increase happens gradually. 
  • Yes, you should be able to, unless there is a big market move against you. The margin required shown on SPAN calculator is not live, so it can be off between 5 to 10% from the actual margin requirement. 
  • Like I said, the margin increases gradually and it has got nothing to do with if the option is in the money or not.
  • Yes, on T+1 day this money gets added to your trading account and can be withdrawn. 
1 Like
3

Thanks Nithin. I was thinking writing options may require heavy investment because of MTM.
For Futures, the MTM is drastically changing as per market movement, For options I understand it is gradual as you said.