Hi,
Posting first time here. First, thanks to all of you for doing a great job on this site.
My question is regarding margin requirements for a Vertical Call Spread in the 2 days before expiry.
I am long a vertical call spread (1600/1700) in NIITTECH. Right now the margin calculator shows the following
Short option margin : 2,67,183
Margin Benefit: 2,45,729
Total Margin : 21,454
Assuming both strikes turn out to be in the money, in the 2 days before expiration what will be my margin requirement for this position?
I went through the post on Physical settlement margins and could not get the actual working for the hedged position. It says there will be benefits provided for the hedged nature of the position, but how is it calculated?
Will it be
a) 1 time the contract value of the short option (375 * 1700) + maybe how much it is in the money by?
b) 50% of the contract value?
c) 2 times the contract value? (I hope not)
Or will it be much lower since it is hedged?
Will the working differ materially if the short leg is out of the money?
Follow up question:
If you trade spreads how do you close it out, when the bid-ask spread of the deep in the money strike is unreasonably wide? For the 1600 strike right now it is 81/112 and the 1700 it is 41.1/41.7
The slippage could be huge depending on the movement of the stock by the time the orders are filled.
Thanks for your time.