Is margin necessary while squaring off position?

Suppose I buy an option at a strike price today, and I want to sell the option at the same strike price after say 7 days (quantity is same), either booking profit or loss. Do I need to have margin for squaring off? I am asking because selling an option requires margin, but buying doesn’t, and if I have a buy position, and I want to square off do I need to have margin?

Please explain scenarios with example, if “yes” is the case.

You don’t need margin for squaring-off position.

Trading is easier when spoken in terms of positions.

When you buy call option at a strike price, you take on a long position. You don’t need margin for the long position. When you square off / exit your long position, there is no need for margin.

When you short sell(write) a call option at a strike price, you take on a short position. You will need margin for the short position. When you square off / exit your short position, your margin will be released.

When you are sitting tight on your cash, that is neutral position. Hope this clarifies. Happy Trading.

Thank you for clarifying.

Is it broker specific, or applicable to all brokers ?

Applicable to all brokers.

Zerodha is asking for margin before you can exit a bought option. It happened twice with me and I could not exit and had to make full loss of premium paid. Raised a ticket to Zerodha but no reply since last 04 days. Can someone throw some light on it.

Hi @BSPURBA, you do not need margins to square-off your Option position, maybe you already had a pending Sell order and were trying to place another Sell order, in this scenario margins will be required as second order will be considered as order for fresh short position.

I have seen this too. Not recently but in 2019 when I was trading options. Now I dont do it anymore so not sure if something has changed.

Thanks for the response. But its happening again. Don’t know why. I am only buying Nifty Puts or calls and margin is being asked to square off positions.

Hi, as mentioned above you do not need margins to square-off your position, you must already have pending sell order, please refer to Orders section and check.

Margin is released immediately when you exit your short position? or it takes a day or two? @ShubhS9

Margins are released immediately when you square-off your position.

Hi sir,

I did an option selling on 31.05.2021 (14900 PE 3rd June ), since i was practising i just did one lot and tried to squire off on 01.06.2021.

In Zerodha It asked me to buy back (The profit was showing as 130 Rupees). When i clicked buy the system asked for the margin of 300 rupees and i did it. Then In my funds section its showing used margin as 300 RS.

I am confused with this amount and my question is

  1. Whether i have paid 300 additional to square off my position?

  2. Will that bring this transaction to negative profit (130 (Profit)-300 (Margin))

I just want to understand why the system asks for margin of 300 rupees while buying the options which i sold a day before.

Kindly clarify my query

Funds will be debited while exiting short oprions(which is a buy).Your cash holds premium collected while selling.

Hi Sir,

Its still unclear for me, sorry i am just a beginner.

Can you please explain a bit detail.

From your answer i could assume that my last transaction was negative P&L. Is this correct? 130-300 = -170?

How this margin is calculated? how is different from the one which is accounted while selling?

Is this a kind of penalty for squaring off the position before expiry?

Sorry for too many questions. Kindly bear with me