ITM covered call physical delivery margin

F&O
1

Need Clarification for covered call selling:-

  1. for covered call are margins required or exempted?
  2. if yes what all margins are applicable for covered call?
  3. Is Physical Delivery margin applicable for ITM covered call?
2

Margins are required for Covered Call as well, the margin requirement will be same as margin requirements for Short Option position. You can check the margin requirements here.

During last two days of expiry, the margin requirements for Short Option position increases to twice of SPAN + Exposure margin requirements. ie. if margin requirement is 100,000 during last two days of expiry this will increase to twice of this to 200,000.

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4

This increased margin requirement - still needs 50:50 cash to collateral ratio?

5

You don’t have to maintain additional margin in 50:50 ratio.

6

@ShubhS9 Could you please clarify. The 50:50 cash to collateral ratio is only for the initial margin?

Does that mean If the margin increases in the last 2 days to expiry, we can fund the “additional margin requirement” with 100% equity collateral?

7

Right, the 50:50 Cash - Collateral ratio is only for the initial margin.

You can.

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8

@ShubhS9 This brings me to the next logical question.

If the increased margin in the last 2 days to expiry can be funded with 100% equity collateral, is there a way to ask the system not to exhaust any limited cash collateral?

By default, even after the ‘initial margin’, does the system always block 50% Cash and 50% Equity collateral, if both are available?

Sorry, I know, the questions are just piling on :slight_smile: An FAQ page that answers such would be useful.