Of course as it is live there will be no deduction if there is no loss, in this case nothing will be deducted if loss is recovered on same day.
Margin call will be triggered immediately once your total cash is lower than margin so as to alert client but RMS will square off your position only once your losses reached may be 40 or 50% during intraday( this % for square off is specific to broker) but to carry forward position for next day one should have full 100% margin.
OK, but letās just say I was losing 30000 only just before the market closes and my deposited margin is 3 lakhs which means my current loss is only 10% of my deposited margin which is less than than the 50% threshold. Would the RMS square off my position immediately before the market closes or would they allow me keep the position? Cause then, the loss is less than the threshold and the exchange does allow that you can deposit you MTM losses after the market closes as well as long as itās deposited on the same day. And it is only if you are unable to deposit on the same day that the exchange charges a penalty. So, does Zerodha provide some limit of time to the clients in case the Mtm loss is less than the threshold right before the market closes and allow the clients to bring in funds during the after hours. Of course, failure to do so will attract a penalty and the next day the RMS will square off the position.
Yeah, they may close position. It is not guaranteed they will but they can.
Yes, if loss is less than 30% or 40% of required, then till 3 pm one has time to transfer and after 3pm RMS has right to close even for 5% shortfall.
What you are saying makes sense and now that I look at it, live risk management is indeed beneficial but thereās one thing that still kinda irks me. Like, there should be a laxer threshold at which the position is liquidated. Cause if you are squaring off at only 30% of depletion, then the client is going to end up losing money unintentionally. Let me illustrate with an example to explain better. You know, sometimes an anomaly could happen in the market and the particular scrip that a client has position in might sharply dip by a lot in a matter of seconds and then it retreats just as fast only to close relatively normal. Such candles then formed have very long wicks with a tiny body. You can call it panic selling or whatever. So, even if the client did keep buffer cash to compensate for live Mtm, not only it could get used up very easily but the deposited margin as well would then deplete rapidly even if only for a moment. It could possibly go below the 30% threshold momentarily and it might get squared off by the RMS. The client would then suffer a huge loss only to see the price go back to normal. What I am saying is that not everyone keeps fixed stop losses. Some people keep time based stops as well. With time based stops, price can go lower than the set price but the position is not squared until the predetermined time is up. So in this situation, if the RMS squares immediately then the client would end up losing against his will. A laxer 50% threshold is much more reasonable and it would prevent premature squaring off as well.
Yeah it is 40 to 50% or even can go up sometimes during the day before 3 pm, I just said as a example of 30%.
I see. Anyway, thanks for bearing with me. Iāll stick around.
@siva So, I was browsing the forum as I am normally fond of doing. And I see people complaining about the Span files. Whatās up with that? I do kind of have an idea about what itās supposed to be but correct me if am wrong. So, I already know what Span and everything is. And I am under the impression that there are certain times during the day, the exchange updates the Span requirement and the way it does so is supposedly in a percentage form I guess? Like, X is the percentage of supposed to be blocked. But if I am right, why are people complaining that the Span is being wacky. Cause even if gets updated during the day a couple times, it shouldnāt differ much from that last file that you get for the day cause there must be a certain look back period involved which should keep the Span percentage more or less the same. I could be wrong of course. So, please correct me.
Span varies based on vol, so if there is big movement in last hour of trading there can be considerable change of span and for big portfolios it can show some effect, difference will be under 5% only but for big portfolios at absolute level it is noticeable, one more reason to have 10 to 20% free cash.
You didnāt really clarify my doubt about the Span file being percentage basis or absolute margin basis. So, thatās one thing.
Second thing, you mean the change is 5% of contract value or 5% of total margin requirement?
Margin is always percent of contract value.
Change is on margin required, if 1 lakh is required now after new span update it will be 105000, so 5% change in margin required.
Hi Guys, I had similar doubts but sadly even after reading through all this I am not sure how this will actually work in real time.
This aside, there have been so many of my own issues answers to which is very tricky to find apart from trying things out in real market. There are so many such doubts which have been discussed in numerous of such tradingqna threads over so many years. I suggest why donāt you guys make detailed blog posts on each of such processes and doubts so that newbie investors get the hang of everything in a comprehensive manner and donāt burn money while learning these things? I know Varsity is there but this is something different we are talking about in these threads, the exact answers to whom no Varsity, no video or no content on the internet contains. @siva @nithin @ShubhS9
I believe this can also be a good source of traffic - so much content throwing so many users which might convert to be Zerodha users. Request you to give it a thought.
Hey, we have detailed posts in Tradingqna, Zconnect and support portal. You just have to search with the right query.
Btw what was your query on margins?
While peakut shares his query, Iāll take this opportunity and slip in mine (on a slightly different tangent), since you are answering.
To set the context, Iāll start with the below 2 rules from Larry Hite:
Iām a very conservative trader trying to make 8-10% annual returns from index options selling, using long term naked puts (1-3 yrs away, cash secured) & short term deep OTM naked calls (1-2 days to expiry).
Now coming to my query. Suppose thereās a flash crash, with nifty falling 10% (or worse) in minutes and it recovers completely within an hour. Now, during that 1 hour, Iāll get margin calls for my mtm losses in the long term puts. My past experience has been that during high volatility, thereās 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?
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).
Feels like Iām working with loose ends and not prepared enough to ensure I stay true to rule 2 from above.
I have worked in the collateral/margin management department with various I banks.
I agree with @siva
Margins get recalculated based on changes in IV and sometimes because of impending HV.
So, if you have a margin call at 10.30 am and you do not honour itā¦ nothing happensā¦ except that your positions will be monitored for possible square off, because of leverage factor.
The problem with Zerodha and India brokers is that the rules change arbitrarily and it cannot be explained even with excel.
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 canāt pass an upfront margin penalty to the customer, so that would mean that we canāt 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.
Got it, thanks. Itās just that preparing for the worst case kills all the returns. Guess thatās the nature of the game.
If SEBIās objective is to safeguard investorās interests, Do you think a regulation around auto-square off might also be around the corner (like minimum reaction time/ no square-offs before 3:20/ lot size determination ) - considering itās completely arbitrary and brokers have vested interest here with all the related charges. (Just wondering, not sure if this can be called a regulatory foresight though :).
The regulator would want squareoffs to be done as soon as possible; they would wish for markets to be safer than less safe. 
I think if brokers today give time till 3.20, it is more to allow customers to transfer additional funds. Otherwise, if you think about it, why even give time till 3.20 pm if the incentive is to generate brokerage?
Got it, thanks for answering to the queries.
Sorry this thread was missed. What I meant here was Varsity is a bit theoretical, while Tradingqna is like a pile of bodies where one has to do a lot of effort, filter out all the rant, endure all divergences from the topic, that too only if one manages to find the right thread, to get exactly what one wants.
I am talking about a product which contains a gist of Tradingqna threads, not threadwise but topicwise.
Letās say one topic can be āOrder Execution in Hedged Positionsā. Now this topic could contain a gist / knowledge squeeze of all nuances which are associated with this topic, currently spread across numerous tradingqna threads. Hope that made sense.
Very hard to collate everything across different threads. But this search works really well plus support.zerodha.com has pretty much all things.