Margin requirements on a hedged position

F&O
1

Hi If I enter a hedged position say buy ce sell ce than do I get additional intraday leverage of 4 times on this hedged position?

2

For Long position you won’t get any leverage as you will need to pay full value (Premium * Lot size) upfront, margin requirment for Short position in Index Options in MIS is 24% of NRML margin. You will get margin benefit as your position is hedged but it will be minimal.

3

Hi Shubh dada
Please I am very confused, the margin calculator is showing 4.5 lakh as amount required for buy 1000 ce one strike and sell 1000 ce of other strike after deducting the margin benefit. I need to know if there is any leverage on this 4.5 lakh required or this is needed in full.

4

You must be calculating margin requirements for AUG contracts as this was expiry week, so you will be seeing high margins, AUG Contracts have expired now, select SEP contracts.

As I said above, If you want to buy an Option even in MIS you will need full cash upfront (Premium * Lot Size), you won’t get any leverage. For Short position in Stock Option, MIS margin requirment is 30% of NRML margin. You will get margin benefit as well as your position is hedged but it will be minimal.

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5

@ShubhS9 And from when do these MIS margins go away for option writing ?

6

MIS leverage for Option writing will start reducing in phased manner from December 1st. It has been explained in detail in this post Update 4th Aug 2020 - Margins for trading stocks & Intraday leverages