In FnO trading - sequence of legs in an option strategy

Zerodha
1

For option strategies - how important is sequence of contracts when booked on Zerodha ? IE do we have have book long positions before the short legs to get margin benefit or is sequence not important as long as all legs of the strtaegy are booked … This is particularly important in trades like iron condor or iron butterfly .

Also the nifty and bank Nifty trade restrictions (due to OI) on Zerodha don’t apply to short positions as I understand so can we book the long legs (out side the allowed OI range ) after we have booked the short positions on these strategies.

2

Sequence is not important, as long as you are executing all legs you will get the margin benefit, doesn’t matter if you execute Long leg first and then Short or execute Short leg first and then Long.

You want to take position, right? You can, if you have Short position, you will be allowed to take Long position in strikes outside allowed range to hedge your position, you can buy quantities equal to the quantities you have shorted, not more.

3

For example for next week expiry if I short 20 lots of 12,200 CE then will I be allowed to go long 12,400 CE. Note both 12200 and 12400 are outside the allowed range for NIFTY on Zerodha

Look forward to confirmation…

4

Yes you will be allowed to.

There is no Strike Price restriction for Shorting Options, so you can Short any Strike, after that once you have taken Short position you will be allowed to take Long position outside allowed range to the extent of quantity you have Shorted.

5

Thanks…are you from zerodha …the comment on the zerodha span page isn’t clear and needs rewording to clarify this aspect…also sensibull for some reason shows buy trades should be booked first to get margin benefits…adding to the confusion…

6

Yes :slightly_smiling_face:

More Information link on the Margin Calculator page redirects you to this article, it is mentioned there.

The reason behind this is, if one has limited capital and cannot take Short position first then they can take Long position first which will give them margin benefit beforehand.

7

Margin needs to be deposited end of day -right ? So even if one doesn’t have enough capital for the shorts and on same day books a long then this problem is solved ? Am I not right here ? Let me know

8

Margins are blocked immediately when you take position. So to take any position you will need to have required funds in your account.

9

So how to solve the strike problem on Zerodha ? Orbis Financial solution not an optimal one as it has too many controls…one solution is to book the strategy in tranches …eg if there are 25 lots of long and shorts them sell 5 shorts buy 5 shorts and then repeat 5 times…

10

Let me know thoughts here …I meant the Orbis solution has its own limitations…

11

Yes, this can be done, you can even use Basket Order, which will make execution easy for you.

12

Thanks…I will check the basket feature …assume both market and limit orders are possible using basket

13

One more question if at a later date I want to exit the short without exiting the long position. Both short and long are still outside the zerodha OI range…Can this be done ? Assuming I provide the extra margin as the buy no longer hedges the short.

14

Or I want to shift the short further OTM…so I buy back the existing shorts and sell new ones ?? That should be possible as buy followed by sell is allowed ?? Let me know if I can simply close the short before closing the long …

15

Yes, both Limit and Market Order’s are available.

Yes, you can do this.

Yes you can do this as well.