How does margin requirement for Covered calls work?
For example Reliance: 952
Lot size: 250
NOV2014 - 980 Calls: Rs 20.
I want to buy 250 shares of Reliance at 952 and short the 980 calls at Rs 20. As long as Reliance stays below 980 I make entire Rs 20 and I make some profit on the options as long as Nifty stays below 1000.
Similarly, I guess the same could be done using Nifty ETFs. Buy NIFTY ETF’s and shorting Nifty calls.
Firstly to get into the covered call, you will have to buy the 250 shares at 952. So you will need around Rs 2.4lks for this. To short 1 lot of options, the margin requirement will be around Rs 30k. So the total money required for this strategy will be around Rs 2.7lks
One of the things that could also be done is that once you buy the 250 shares, you can pledge the shares and use that as margin to take the short option position.
Same thing with Nifty or any other stock as well.