Margin Requirements for Options writing

Algos, strategies, code
#1

Dear All,

I need to know the margin requirements for going long and short on options

  1. For LONG CE and LONG PE it is just Premium * Lot Size
  2. https://zerodha.com/margin-calculator/SPAN/ shows me the required margins for SHORT CE and SHORT PE. It is also mentioned that it is based on the previous day’s close value

Is there a formula (even approximate number will suffice) for the same

I need to incorporate this in my algo so that if this exceeds my margin requirements then I have to find out the next optimal strategy. Kindly help.

Tagging frequent posters - @Sowmay_Jain @AlgoGeek and @nithin

#2

You can check this link on NSE website. The formula is super complex, and SPAN is trademarked product of CME. They have the IP, so getting the exact calculation is not possible. You can try to be close to it.

We will soon give you API’s to https://zerodha.com/margin-calculator/SPAN/ . Should solve your problem.

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#3

Hi Nithin, I have been wondering for long time about these short option margin. Suppose there is s Short Ce position at 280 ce and also a long ce position at 300 (assume stock spot at 250).

So theoritically max loss for this credit spread can never be more than 20 rs x lot size. But I always see the margin required for this position exceeding far more than actual loss potential.

Whats the logic behind it?

#4

Amol,

I have answered this earlier here.

#5

Thank you for the response. Just to confirm…So the margin requirement is fixed by the exchange and it is always same irrespective of which broker account u have…am I right?

#6

Long and Short are used incorrect in your question. It’s Buying and Selling an option. If you are Buying a Call Option or Selling/Writing a Put Option then your​ position is Long. When you are Buying a Put Options or Selling/Writing a Call Option then you are shorting.

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#7

Overnight margin requirements are the same. Brokers might giving varying intraday leverage.

Also, few brokers like us(Zerodha) settle with exchange on the same day, whereas most do it on the next day. Since we settle on the same day, the overnight margin requirements are slightly lesser with all those settling on the same day.

#8

Thanks a lot Nithin for detailed explaination. Also, after reading the link you provided for the your answer In some previous thread, I have a suggestion:

If Zerodha could provide the facility to take option spread positions in a single order, this will ensure that both legs of the spread are opened/closed at the same time and margin requirement can be then reduced to the max loss potential of that strategy. ( i.e. If i place limit order for credit spread at 2 rs, then both of myborders will get executed only when my short option is being sold at 2 rs higher premium than the long option I want to buy)

#9

Hey Nithin, pinging you after an year (:slight_smile:)

Can this be given as a csv file please? underlying, option cepe, strike price, expiry and margin

#10

@Abid_Hassan Anything sensibull can do ? :slight_smile:

#11

Sure @nithin
In Sensibull, for any single leg Index trade, you can already see rough margins.
We will move to a much more accurate margin by Monday

Next, we will give margin requirements for single stocks, and multi-leg strategies

@rbtj - If you need a quick and dirty excel, and a how-to on the quick and dirty margin calc, shoot me a mail at abid at sensibull :slight_smile:

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#12

Wow! Thanks a ton @nithin and Abid…

@Sensibull :slight_smile: I will drop a mail to you regarding this.

#13

You’re welcome @rbtj
Also, saw your DM about WIMWI superfachcha (hopefully no one here will figure out what we are talking about here) bit very late. Didn’t know there was a DM feature. I am still figuring out how this forum works :slight_smile:
Had replied.

Also. Please do try out the platform and let me know your detailed feedback. That would help immensely.
trade.sensibull.com/options

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#14

Hi Nitin, where do I get the Span API ? Has it been made available ?

#15

hmm… we don’t have it yet.

@Sensibull can you guys expose yours?

#16

Hello @Dhruv_Walia

  1. do you want this as an API? Or is it enough that we show all the margins?
  2. Do you want margins on all sorts of combination strategies?
  3. This is tricky. Do you want standalone margins of 1&2, or do you want the calculations to take into account your existing positions which give you a margin benefit?
#17

Ideally an API would be the best, inputting a pair of scripts and outputting the margin required. But i think standalone margins would be the second best thing. Where can I get all the margin information ?

#18

Hey Dhruv,

There is Zerodha’s Margin Calculator for now.
https://zerodha.com/margin-calculator/SPAN/

We are putting out our own soon. (<2 weeks)
Just swamped with many other features.