How is the margin updated?

[nithin]

@abcd5662

Now coming to my query. Suppose there’s a flash crash, with nifty falling 10% (or worse) in minutes and it recovers completely within an hour. Now, during that 1 hour, I’ll get margin calls for my mtm losses in the long term puts. My past experience has been that during high volatility, there’s very little time to react to those margin calls (have had my positions auto-squared off within minutes). My worry is that what if I fail to add the required margins before the RM team squares off my positions only for nifty to recover back completely (and not allowing me time to buy the underlying)? Will my cash secured puts simply become naked puts?

@abcd5662

Is there a way I can get into an agreement with zerodha to have them never square off my NRML positions and I pay short margin penalties (till my pledged holdings are sufficient to cover for any default from my end).

In normal markets, this is never an issue. But you are right; on days when markets fall, say, upwards of 5%, your margin requirement for a short option may go up, leading to our risk management team squaring positions. As per new regulations, we can’t pass an upfront margin penalty to the customer, so that would mean that we can’t get into any arrangement to allow this position even if you are ready to pay the margin penalty.

The only way to cover this risk is to never trade with the entire capital. Always keep sufficient free funds to cover the worst-case scenario. By the way, being conservative in the long run will also help increase the odds of winning when trading.