I had entered a Bull-call spread in Nifty 9800 ~ 9850 Strikes in the last week. The FnO calculator said at the time of entry, the margin required is ~14,500 INR. There was high volatility and it made sense. Yesterday volatility was higher so they FnO marging calculator is showing 15,500 INR. I was cool.
However in my Kite, the margin used is showing as 22K. I have no other position, only the Nifty 9800 Call long, and Nifty 9850 short. What am I missing? Should I raise the concern on this point? Please guide.
Are you sure?
Have you accounted for span?
Only exposure margin is 15k
Span will increase based on the moneyness of your spread.
I would assume 20k as reasonable
You accounted for buying long call? because margin calculator will show only margin required with out including for longs, for buying option additional money is required, can you confirm this once.
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Yes the margin taken by zerodha and margin which is showed in calculator is not the same. Margin taken is higher than wat is showed. Like he said around 22-25k
Thanks to all,
I am convinced that the margin considered is correct. I will learn what happens when I unwind the trades on 25th June. How much margin is returned.
Hi @siva-reddy
This thread has helped traders realise that margin calculator is only to demonstrate the approximate amount that could be blocked to enter the short legs of a trade.
Is it possible to modify the final calculations by including the ltp of the long position automatically, so traders understand that the bottom line cost is quite significantly higher.
Sensibull already depicts the overall amount that will be blocked- short and long.
This I feel is important because many noted figureheads give sweeping statements like:
“ Take an iron condor for 33k” as if it’s an overall package.
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This is said in margin calculator page.
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@siva-reddy,
Thanks for taking this issue, and sharing all the information.
I was trying to calculate the position sizing for my option strategies via XL sheet, to replicate what sensibull is doing over the cloud. Even though most of the data can be collected manually, or through XL automation, the premium calculation is bit different from what I have observed. I needed this, since I was creating system of allocating funds in my portfolio.
Challenge is, if I don’t properly calculate the amount Zerodha will take, then I might end up consuming the fund that has to be there for margin correction.
Based on the market status, strategy, I have considered the premium that I pay, the premium that I recieve and the margin that I have to take when I sell (through margin calculator). There is some kind of P&L accounting that I am missing out here, that changes on daily basis.
I suppose, I have to understand the OI part at the EOD, bit more deeply. I have seen course in varsity explaining on this. I will check it out and try to code the same into my excel.
Premium is price of the option, why you want to calculate it? it is available on system.
Objective is to enter the option position with the calculated reward and risk.
In a stock this is very simple. Based on the system (Fundamental, Technical) you take a short / long position with target and stop loss price.
When it comes to option, reward and risk calculation is a bit tricky.
You must be knowing that the option which is OTM, ATM and ITM behave differently based on where the spot is with respect to strike. Volatility and time to expiry add to the complexity.
Before taking a naked position in option , calculating the target premium and stop loss premium with respect the underlying price target gives theoritical risk/reward ratio. (This whole exercise is moot, if I am going to use any of the option strategies and cap my risk and reward. And wait till expiry).
As I was writing this, I thought I can open both Option and underlying chart side by side and trade based on realtime. I will get to know my premium the moment my underlying reaches my SL or Target price. In case of real time decision making, I will still not visualise the assymetric reward and risk, if the spot goes near/ crosses/ away from my strike. I might regret if I exited my position, simply because I was not prepared enough to tolerate the risk as the prices moved away from stike.
This is why I am calculating the premium, using the Black-Scholes merton formulae. Many online experts in options have created excel sheets with appropriate functions coded for calculating the premium using BSM formulae. I am using one such excel sheets and trying to formulate a system.
