Margin benefit of hedged positions = Higher Premiums in the Long run?

F&O
1

From June 2020 SEBI had introduced the margin benefit rules wherein by having a hedged position the margin is lower Eg: a Call spread on nifty will cost 20-30k whereas a naked short will cost 1.4L

Question : Once the vix falls to pre-covid levels say 12-15, will the premiums be comparable to what they were during pre-covid times ? Will it be higher or lesser? [ Given all other factors remain same as pre covid, say interest rates, etc]

Ans1: Since margin is less more people will start writing options hence supply will be more hence lesser premiums

Ans2: For margin benefit both buy and sell leg must be present hence the premiums will remain unchanged from this factor

Because of new Intraday margin rules and interest rate changes it would be difficult to isolate the premiums rise or fall against this cause i.e. margin benefit for hedged positions. Hence it will be almost impossible to verify the result and will remain a theoretical perspective

What do you think ? Please give your views
Thanks

2

Margin benefit availed as part of hedging shouldn’t ideally have an impact on option price. The option price depends on the volatility of the underlying, expiry, expected events and risk free interest rate.
If Nifty volatility falls, the option prices for Nifty will also fall.
Due to intraday margin rules and margin benefit, there may be increased or decreased liquidity.

3

Yes , so question is given all factors remain same will the premiums also be the same ? I am trying to determine the effect of this rule on premiums theoretically .

4

Yes. Premium would remain same if all other factors remain the same.