Note: extra margin won’t be required in case of hedged index positions, as they are cash settled only. While in stock options due to compulsory physical delivery of stocks, extra margin is required in the last week of expiry.
For ITM Long Stock Option positions, you’ll need additional margins from expiry minus 4 days. The exchange blocks physical delivery margin as a percentage of applicable VAR + ELM + Adhoc margins of the underlying.
For Short Option position, the margin requirement will only increase on expiry day to 40% of the contract value or SPAN + Exposure margin (whichever is higher).
In this case it is fine to keep the margin for the leg which is higher right? why margin needed for both? if both legs are kept the single leg risk is not there… if exited one leg, only margin for other leg is required.
Bro…I think net off would incur 0.1% brokerage of contract value…and I think stt as well…concept of notional delivery applies that’s why I think…Hope someone more knowledgeable can elaborate…
No. As an option seller, you will get to keep the premium received, while you will lose the entire premium paid for buying an option. This is because ITM Stock Options expire at 0 value. The Strike Price of the option will be the settlement price for the physical settlement of shares.
In the above scenario, for the Long Put Option, you will be delivering underlying shares at 351.5 and receive 351.5 * Lot Size, while at the same time you will be taking delivery of shares for Short Put Option at 356.5 and will have to pay 356.5 * Lot Size.
But as your position is hedged, the obligation will be netted-off and the the difference between the amount payable and the amount receivable will be your Net P&L. You can check out the exchange FAQ here, the exel sheet explains the scenarios in detail.
For all netted-off positions the brokerage will be charged at 0.1% of the physically settled value.
For netted-off positions, there will be STT charged at 0.1% on the long position(s) as this is treated as notional delivery. More details here.
@ShubhS9 For short deep OTM stock options, are the additional margins required on Wednesday evening or Thursday morning?
If I were to square off the position on Thursday morning as soon as market opens, would I still be required to bring in additional margins?