Is not happening, Mtom is being considered in my Bull PUT spread , margin keeps on changing!! and i too have the same issue as mention by @maddy_Des
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They said yesterday’s move was record breaking for any monthly expiry day. hence this issue surfaced.
My short put was in 20Lkah MTM loss and my long put in 19Lakh profits at one point in time.
And my whole margin was utilized gradually.
Just wanna know if RMS will square off positions in case of huge apparent shortfall? In case of non expiry day and RMS wont square off, will there be shortfall for overnight and hence penalty?
Eagerly waiting for answers.
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The current mechanism of Mtom calculation works based on the following methods.
If a naked short/long position in futures/ Option short mtom losses will be part of the margin used based on the previous close price.
Futures settlement happens daily basis, based on the profit/loss Mtom will be adjusted on the account.
Whereas in option short there is no Mtom calculation for the day unless the position is closed, the amount of buy value will be adjusted to the account.
For options, the short margin will be increased/ decreased based on the strike to the current ltp.
If the option is OTM when trade was executed but the market goes against your position & turns in the money, the margin requirement increases gradually based on the strike.
As per your concern on the Hedge position where Mtom of short position will be always part of the margin used whereas long options Mtom will not be part of it for the carry forward positions.
As part of risk management, we do consider long options value for the hedge position since the risk is limited & as long as the position is hedge there will be no square off from our end.
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These points are still not so clear ,It will be of very useful to one and all if it is explained with
examples in a detailed manner.
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@Sam Please clear do you mean to say the following ??
1.) Margins will keep on increasing in case of ‘Bull Put Spread’ going deep ITM,
2.) But the positions will not be squared off,
3.) But we will have to face short margin penalty because M2M loss of short option will be considered but M2M profit of Long Option will not be considered.
Is my understanding correct ?
1.) Margins will keep on increasing in case of ‘Bull Put Spread’ going deep ITM.
As long as the position is hedged, margin increment will not have any impact on your position.
2.) But the positions will not be squared off,
No position won’t be squared off until the hedge position is maintained.
3.) But we will have to face short margin penalty because M2M loss of short option will be considered but M2M profit of Long Option will not be considered.
Options Mtom will not be part of daily obligations for short/long positions.
So if the short position is making a loss of 10K & the long position is making a profit of Rs 8K, the margin used column will consist of Rs 10K because it calculates on the derivative max loss position in the portfolio.
Since your position is hedge it will not have an impact.
Hope this clarifies your doubt.
@Sam
1.) But penalty we will have to pay in case of Short margin in this case, right ?
2.) Second thing I want to know is suppose I have Margin money only and not real cash, then if I sold some option to receive premium of say 20k then can I buy an option using this 20k premium received ?
1.) But penalty we will have to pay in case of Short margin in this case, right ?
There won’t be any penalty unless your hedge position is broken.
2.) Second thing I want to know is suppose I have Margin money only and not real cash, then if I sold some option to receive premium of say 20k then can I buy an option using this 20k premium received ?
Yes, You can use the premium credit to buy the options only.
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And what about futures, can we buy/sell futures also using received option premium ?
Options settlement happens on T+1 day basis, so futures / Equity trading is not allowed with premium credit for the day, only your allowed to trade in option buy/sell on the same day with premium credit.
Can you please tell me what exactly you are pointing out with that statement?
Sam said that no short margin penalty will be there in case of hedged position while Nithin sir is saying that there will be penalty in case of notional loss is not covered with extra margin or cash disregarding the fact if we have hedge or not.
If any future is involved then you need to adjust that m2m with cash, for options there will be no marking to market which means daily settling the loss with cash is not required but the margin required may go up after the position is initiated, so always need to maintain span+exposure.
Ah my bad. If the position is completely hedged it wouldn’t matter.
As regards to the same issue, relating to margin calculation/requirements wrt out current open positions, I have highlighted a bug in Kite app. In the order window it displays wrong margin requirements most of the times when we try to open a new position (with some positions already open). I have tried very hard to put it across your incompetent helpdesk team and to make them understand the issue. With painstakingly great effort I have got them take note of the issue and raise an SR# 20210415542485. The helpdesk team has acknowledged the bug in the system and assured me they will work on this and come up with resolution. But I have been patiently waiting to hear back from them for a long long time now but to no avail. I am sure they have not even made an honest attempt to address the issue. Can you take cognizance of this and expedite the resolution? This will immensely benefit the active traders who are already going thru the strain of coping up with the draconian peak margin rule.
I just checked that ticket, next time you encounter any rejection like this can you message me directly on same day? would be easy to recreate the case.
FYI- we have one corner case where if there are already two legs in system and for third leg margin benefit will come once order is completed, this will be fixed in next RMS update, apart from this there are no bugs as I am aware off.
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I cannot waste my time and energy in providing you the artifacts again and again. I have already provided 2 instances of these errors to your team earlier and have spent enormous time making them understand the issue rather than trading.
Please simulate these test cases yourself and address the issue. I am sure you can recreate the test cases.
@nithin please help if it is possible.
As mentioned above we have issue for three leg orders, verified with your position, this will be fixed in next RMS update which can take months.
Issue is margin benefit will be available once order is completed but not before for third leg.
R u sure about the point 1?
I had debit spread overnite…market moved in my direction. margin available was 35000…as market went i my favour sell leg was giving continous loss…so margin available went to negative. though the position was in profit.
Pls. reply
@siva if you could also le me know