How does a brokers risk management software handle hedged positions?

How does a brokers risk management software handle hedged positions?

Does it auto-square off one leg, if it has crossed a certain negative limit irrespective of the fact that the other leg is in profit, or does it consider the overall position?

E.g: Nifty @11350.
I am moderately bullish and create a bull put spread: Sell 11300 PE and buy 11250 PE.

Now, if Nifty starts falling against my expectation, the 11300 PE will be in a loss, but 11250 PE will be in profit. Max loss is limited and fixed, due to buying 11250 PE (hedged), but will the broker software auto-square off the losing 11300 PE after a certain limit is reached?

@nithin Please help. Also, is the method of handling such scenarios broker specific or is it common for all brokers ?
(Like Zerodha might consider overall hedge, while some other ABC broker might square off after one leg crosses a limit? (By the way, i am not Aniket :slight_smile:)
I saw a quora article see the red circles, and hence my question:

Can be different from broker to broker, but ideally in this case one side should not be closed by broker.

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@siva Since you are from Zerodha, so you confirm that Zerodha’s risk management wont do an auto-square off on one leg in this case (if i got you correctly), and what you mentioned is not a generic statement as what is the ideal case, right?

As I said ideally we don’t do but can’t guarantee on that.

Does any broker in India provide the flexibility to client by which the client can set (without using software APIs e.g. KITE API) -

  • In case of margin shortfall, the sequence in which the positions to square-off from the open positions?
  • In case of stop-loss is triggered on one position, associated positions specified by client should also be exited with client specified limit price?

As per my knowledge it is not possible.

I think it is possible by grouping, in sensibull