Let’s say I am executing a strategy on Friday for the next expiry. Here are the positions I took:
Nifty 13APR 18000 CE sell
Nifty 13APR 17500 PE sell
Nifty 13APR 18500 CE buy
Nifty 13APR 17300 PE buy
On Monday, I realized that I have accidentally exposed to a much bigger loss on the upside (18000-18500). Now, I want to square off my 18500 CE bought and buy 18300 CE instead of that. Here is my query:
If I square of my 18500 long CE, and place a fresh buy order for 18300 long CE, would I still get the margin benefit?
Should I add the fresh CE long position that I want to buy before squaring off the existing CE long position? Does it make a difference
Thank you for the answer. I have a follow up question on this now. For this case, 18300 buy order will go through as it is within the range for this week. But if it were outside the range for this week, in that case will the buy order go through?
My understanding is that if a strike is outside the allowed range, then you need to have a sell position first to execute the hedge. In this case, if I don’t square off 18500 first, wouldn’t 18300 be considered as a normal long call buy order? Please correct if I am wrong
Right. @trade_expiry, if the option you’re trying to buy is outside the allowed range then you won’t be able to buy it. However, if you hold a short option position, you can buy options at any strike price, to the extent of quantity shorted.