For intraday option buying do we require actual cash or cash component is sufficient
If we have only cash component (like pledged liquid bees etc) & no cash in account why does Zerodha not allow MIS orders for buying options?
What is the leverage provided here like cash market we have 5 times leverage
Hey @Vijay3, you’ll need cash in your account for option buying, even if you’re buying in MIS. There is no leverage, you will have to pay the full premium (Price * Lot Size).
Hi @ShubhS9 - Are these SEBI’s exchange based rules for Broker - Bcos for seling we have margin requirements bcos of unlimited loss - but for option buying the premium is the max loss - then why can’t broker provide the same margin benefit as in cash market (atleast 1:1) with cash component atleast in MIS or only in MIS - Is this rule not to allow over trading by retail traders 
Bcos if I am a option seller & my capital is already pledged in the cash component & I cannot use that same capital to buy options when not selling, it really defies logic. Why such a rule?
The present system is not efficient or atleast forces to have unnecessary provisions. If one have cash equivalents then buying options should be allowed. Question comes that from where money will come to credit sellers account but why this money transaction is required in the first place. What purpose it serve? infact, removing the concept of buying options with cash only will also eliminate balancing mark to market on daily basis and bring stability in the market. But the fact is most of rules are made for benefiting few rich or powerful. If others also gets rewarded it is because either they can’t be eliminated or worse they are the product/process themselves.
Well said - it is the making of the few who control the market - even if we take it for a fact to credit money to the seller - the final settlement only happens on expiry (stocks T+2 & options only on expiry) Also what we are considering here is only intraday & broker can settle with the pledged instruments the loss if at all the buyer does not have enough funds or does not load the required money for the loss - option is definitely not going to become 0. Take money from retailers & not provide even the least of the benefits to them
@ShubhS9 - one more question say I have no cash in account to buy options so in intraday MIS order if I short one ATM option (for which I have enough margin in pledged instruments) and use it to buy 2 OTM options & if I square off only my ATM sell position alone what will happen to my buy positions - will it be squared off automatically or peak margin penalty is raised or will my pledged instruments be diluted intraday itself - or what will happen?
According to my understanding the seller of the OTM options will get his money when I buy bcos I had money thru selling ATM option - but to buyback the sold option I will not have enough cash - so will the square off of the ATM option not go thru?
In this scenario, your account will result in debit balance (Available Cash). Position will not be squared-off since you have sufficient margin received from pledging securities.
There will be no penalty but if you do not add funds, interest will be charged on the negative balance at 0.05% per day.
Pledged securities will not be squared-off on the same day. These will happen only after you fail to add funds in the given time after an notification is sent to you. Explained here.
@ShubhS9 - All this transactions I have mentioned is intraday - so even with margin call - what is the impact?
Also as I have explained I have enough margin to sell an option lot - so there shld be no issues wrt margin for 2 buy option lots (exposure is only premium) - so will I receive margin call for negative Available cash?
And will my positions be squared off intraday or only by EOD - which system itself shall do as it is MIS orders?
So what is the ultimate loss here - only the incurred loss of the buy positions rt? And if that is settled by EOD then there shld not be any issue rt?
Not in this case. Since you have sufficient margin received from pledging securities, there won’t be margin call. My bad, misread it, have updated the above answer.
Right, but if your buy option position is in loss, the premium you receive after squaring-off the position will be less and will result in negative balance in your account.
So, you will have to add funds or there will be interest applicable as explained above. Also, if you have negative cash balance in your account, you won’t be able to take fresh positions. Explained in detail here: