Negative fund balance because of SL order - Intraday options selling

My fund balance is 10 lakhs. I sell intraday (MIS order) - 14 lots of an ATM straddle in Nifty (17950CE and 17950PE).
I buy 14 lots of deep OTM hedges to reduce the margin. (18800 CE and 17100 PE).

According to the margin calculator, the funds needed is 10.9 lakhs and the margin that will be blocked is 9.78 Lakhs.

If I create this position, and 9.78L is blocked, my fund balance is 10L - 9.78L = 22k.

Now if I add an SL-Limit order of 25% to each of the short legs, the orders get processed, but my fund balance is almost -2,00,000 and I get a message from Zerodha saying more than 100% of margin has been utilised and my positions can be squared off - because SL for sell orders need to come from cash.

Here are my questions:

  1. Since the pending SL orders here are creating the negative balance, will Zerodha actually square off my positions after a while?

  2. Since this is an intraday transaction, will there be any penalty on the negative balance? If yes, how much?

  3. And most importantly, if I have a negative balance, and my SL order has already been sent to the exchange, with trigger pending status - will the order actually get executed when the trigger condition is met or will the order get rejected?

Thank you!


No, our systems will identify that the margin shortfall is due to the pending SL order and wont be squared as your positions margin is still positive.

No, since your margin is still positive without the pending SL order, there wont be any peak margin penalty. However, since you have only 22K free cash, if there is an intraday margin increase, it cant lead to peak penalty. Its advisable to maintain 5-10% free cash to avoid this.

The order will execute. There are no restriction on exiting an open position.

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