# New margin framework is here - to benefit hedged positions **URL:** https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652 **Category:** Announcements **Created:** [February 24, 2020, 1:47pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652 "2020-02-24T13:47:55Z") **Posts on this page:** 20 **Page:** 1
### Author: ![nithin](https://tradingqna.com/user_avatar/tradingqna.com/nithin/32/5_2.png) [@nithin](https://tradingqna.com/u/nithin) #### Post date: [February 24, 2020, 1:47pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/1 "2020-02-24T13:47:56Z")
**16th May update** The changes in the margin framework will be effective from June 1st, 2020. Check this [NSE circular](https://www1.nseindia.com/content/circulars/CMPT44391.pdf). * * * This has been a long time coming — margin reduction for positions that hedge each other. SEBI has just put out the new margin framework for cash and F&O (Equity and currency) segments. [Check this](https://www.sebi.gov.in/legal/circulars/feb-2020/review-of-margin-framework-for-cash-and-derivatives-segments-except-for-commodity-derivatives-segment-_46058.html). Here is how margin requirements will change **Cash market** No change in margins. Check below for Group 1 stocks. | | Current | New | Change | | --- | --- | --- | --- | | Group 1 | | | | | VAR | 7.5% | 9% | | | ELM | 5% | 3.50% | | | Total | 12.50% | 12.50% | No change | Earlier there was no fixed VAR + ELM structure for Group 2 and 3 stocks. Now it is minimum 21.5% VAR and 3.5% exposure margin for group 2 and minimum 50% VAR and 3.5% exposure margin for Group 3. So margins remain relatively the same for cash/stocks. **F&O (Equity & Index)** Check [this doc](https://docs.google.com/spreadsheets/d/1VJ_Go3ImDvu_DBA32zHC6mNb_8r32D97wZ3G67SGtH4/edit?usp=sharing). These are just approximate margin requirements, we will put out our new margin calculator as soon as we get all details on this. ![Screenshot_107](https://tradingqna.com/uploads/default/original/3X/d/8/d89d9dbfffff799aae7b216ae085e282851a3aff.png) Highlights - Margin required is relatively the same for naked F&O positions. - Margin required for naked shorting of stock options seems to have gone up (double-checking this) - Margin required for positions which have limited risk drops by up to a whopping 70%. - Price scan range is now 6 Sigma vs earlier 3.5 Sigma (both for stocks and F&O). What this means is that if volatility picks up, margin increase will be higher than before. I know some of you might have expected even lesser margin requirements for hedged positions, but as I have mentioned earlier - there are execution risks involved as well (client exiting the long options portion of the strategy and hence ending up holding the short positions with unlimited risk with very little margin). This new framework is a great starting point and hopefully as our markets mature the margin required for hedged positions go even lower from here. Exchanges will most likely put out their circulars, and the new margins will most likely come into place from May 1st 2020. So yeah, finally, trading Option strategies with the new lower margins will make business sense for all traders. This should hopefully get a new breed of traders to the markets. For all those who don’t know much about trading Option strategies, here is how you can get started: > **[Option Strategies – Varsity by Zerodha](https://zerodha.com/varsity/module/option-strategies/)** > > The module covers various options strategies that can be built with a multi-dimensional approach involving Option Greeks, Risk-Return, etc. > **[Sensibull - India’s Largest Options Trading Platform](https://sensibull.com)** > > Real and Virtual trading, Options analysis tools, Real-time prices, Advice, Free Video Courses and more. Trade directly with your broker. Take a Free Trial! ---
### Author: ![Prakhar\_Agrawal](https://tradingqna.com/letter_avatar_proxy/v4/letter/p/ea5d25/32.png) [@Prakhar\_Agrawal](https://tradingqna.com/u/Prakhar_Agrawal) #### Post date: [February 24, 2020, 1:49pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/2 "2020-02-24T13:49:41Z")
Great news! ---
### Author: ![adityaparakh](https://tradingqna.com/user_avatar/tradingqna.com/adityaparakh/32/24146_2.png) [@adityaparakh](https://tradingqna.com/u/adityaparakh) #### Post date: [February 24, 2020, 2:16pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/3 "2020-02-24T14:16:02Z")
@nithin , Thanks for the update. Alright , So primarily Iron Condor or Spread based strategies to benefit. How about the Intraday leverage ? Any clarity on that ? Shortfall Penalty (based on Intraday monitoring) to be imposed from April 1 and Peak Margin utilisation reporting to start. ---
### Author: ![siva-reddy](https://tradingqna.com/user_avatar/tradingqna.com/siva-reddy/32/111_2.png) [@siva-reddy](https://tradingqna.com/u/siva-reddy) #### Post date: [February 24, 2020, 2:18pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/4 "2020-02-24T14:18:00Z")
> [@adityaparakh](#): > > How about the Intraday leverage ? > Any clarity on that ? > Shortfall Penalty (based on Intraday monitoring) to be imposed from April 1 and Peak Margin utilisation reporting to start. Nothing on that yet, exchanges need to give clarity on those, current circular is related to only margins for normal and hedged positions. ---
### Author: ![satz2007](https://tradingqna.com/letter_avatar_proxy/v4/letter/s/dec6dc/32.png) [@satz2007](https://tradingqna.com/u/satz2007) #### Post date: [February 24, 2020, 2:21pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/5 "2020-02-24T14:21:37Z")
@nithin That’s a great news. Any Benefit for Calendar Spread like selling Monthly Option and Buying Weekly option? ---
### Author: ![gaurav\_choudhary](https://tradingqna.com/user_avatar/tradingqna.com/gaurav_choudhary/32/20465_2.png) [@gaurav\_choudhary](https://tradingqna.com/u/gaurav_choudhary) #### Post date: [February 24, 2020, 2:41pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/7 "2020-02-24T14:41:33Z")
@nithin so how much money i will need in account for bear call spread…25k only or 85k first and thereafter 60k will be credited back? ---
### Author: ![Himanshu\_Gupta1](https://tradingqna.com/user_avatar/tradingqna.com/himanshu_gupta1/32/18655_2.png) [@Himanshu\_Gupta1](https://tradingqna.com/u/Himanshu_Gupta1) #### Post date: [February 24, 2020, 2:52pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/8 "2020-02-24T14:52:36Z")
So there is no change in intraday margin for futures as of now Correct? ---
### Author: ![trader\_dude](https://tradingqna.com/user_avatar/tradingqna.com/trader_dude/32/17122_2.png) [@trader\_dude](https://tradingqna.com/u/trader_dude) #### Post date: [February 24, 2020, 2:55pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/9 "2020-02-24T14:55:55Z")
Does this mean liquidity in stock options will increase? ---
### Author: ![siva-reddy](https://tradingqna.com/user_avatar/tradingqna.com/siva-reddy/32/111_2.png) [@siva-reddy](https://tradingqna.com/u/siva-reddy) #### Post date: [February 24, 2020, 3:02pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/10 "2020-02-24T15:02:27Z")
> [@Himanshu\_Gupta1](#): > > So there is no change in intraday margin for futures as of now > Correct? Yes. ---
### Author: ![moneymakingmonk](https://tradingqna.com/user_avatar/tradingqna.com/moneymakingmonk/32/24101_2.png) [@moneymakingmonk](https://tradingqna.com/u/moneymakingmonk) #### Post date: [February 24, 2020, 3:30pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/11 "2020-02-24T15:30:08Z")
This is such a fantastic news. When is Zerodha implementing the new margin rules? ---
### Author: ![Arpan](https://tradingqna.com/letter_avatar_proxy/v4/letter/a/e480ec/32.png) [@Arpan](https://tradingqna.com/u/Arpan) #### Post date: [February 24, 2020, 3:32pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/12 "2020-02-24T15:32:12Z")
@nithin @siva-reddy any change in CDS margin ? ---
### Author: ![nithin](https://tradingqna.com/user_avatar/tradingqna.com/nithin/32/5_2.png) [@nithin](https://tradingqna.com/u/nithin) #### Post date: [February 24, 2020, 3:36pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/13 "2020-02-24T15:36:31Z")
> [@trader\_dude](#): > > Does this mean liquidity in stock options will increase? Ideally, it should. ---
### Author: ![nithin](https://tradingqna.com/user_avatar/tradingqna.com/nithin/32/5_2.png) [@nithin](https://tradingqna.com/u/nithin) #### Post date: [February 24, 2020, 3:37pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/14 "2020-02-24T15:37:02Z")
> [@moneymakingmonk](#): > > This is such a fantastic news. When is Zerodha implementing the new margin rules? Exchanges have to first put out the circulars, SEBI circular says May 1st though. ---
### Author: ![Arpan](https://tradingqna.com/letter_avatar_proxy/v4/letter/a/e480ec/32.png) [@Arpan](https://tradingqna.com/u/Arpan) #### Post date: [February 24, 2020, 3:47pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/15 "2020-02-24T15:47:52Z")
Hi…when will the margin calculator be updated ? ---
### Author: ![MohammedFaisal](https://tradingqna.com/user_avatar/tradingqna.com/mohammedfaisal/32/3680_2.png) [@MohammedFaisal](https://tradingqna.com/u/MohammedFaisal) #### Post date: [February 24, 2020, 3:55pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/17 "2020-02-24T15:55:23Z")
> [@Arpan](#): > > @nithin @siva any change in CDS margin ? Price scan range is now 6 sigma for CDS(previously 3.5 sigma), however, the exposure margin has been reduced in half, so you will see a very slight increase in margins. For USDINR, the minimum SPAN has been raised from 1% to 1.5% of the contract value and exposure reduced from 1% to 0.5%. In low volatility days, the margins will be almost the same as now. ---
### Author: ![ashish\_kumar2](https://tradingqna.com/user_avatar/tradingqna.com/ashish_kumar2/32/24147_2.png) [@ashish\_kumar2](https://tradingqna.com/u/ashish_kumar2) #### Post date: [February 24, 2020, 4:16pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/19 "2020-02-24T16:16:45Z")
Hi @nithin. Thanks for the update. Will you please also clarify about the margin impact on Short straddle /Strangle? Waiting for your reply. Thanks, Ashish K ---
### Author: ![maddy\_Des](https://tradingqna.com/letter_avatar_proxy/v4/letter/m/bc8723/32.png) [@maddy\_Des](https://tradingqna.com/u/maddy_Des) #### Post date: [February 24, 2020, 4:19pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/20 "2020-02-24T16:19:50Z")
Dear @Nithin Can you plz point towards the portion in the circular from where you deduced this margin reduction? I read the whole pdf but could find the hedged positions mentioned nowhere. There is only mention on “calendar spreads”! TIA ---
### Author: ![kshitijjain](https://tradingqna.com/letter_avatar_proxy/v4/letter/k/d9b06d/32.png) [@kshitijjain](https://tradingqna.com/u/kshitijjain) #### Post date: [February 24, 2020, 4:33pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/21 "2020-02-24T16:33:24Z")
@nithin @siva-reddy Any update on margin for shorting monthly options and hedging with weeklies?? Many traders use this strategy?? ---
### Author: ![deepak2508](https://tradingqna.com/letter_avatar_proxy/v4/letter/d/9e8a1a/32.png) [@deepak2508](https://tradingqna.com/u/deepak2508) #### Post date: [February 24, 2020, 4:41pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/22 "2020-02-24T16:41:12Z")
@nithin hi nithin 1 there are plenty of strategies which can be used in hedgeing so will all strategies will get reduced margin? 2 will zerodha s/w allow all such hedgeing strategies ( the sw needs to flexible to provide multiple hedgeing) to retail customers??? ---
### Author: ![MohammedFaisal](https://tradingqna.com/user_avatar/tradingqna.com/mohammedfaisal/32/3680_2.png) [@MohammedFaisal](https://tradingqna.com/u/MohammedFaisal) #### Post date: [February 24, 2020, 4:44pm UTC](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652/23 "2020-02-24T16:44:24Z")
> [@ashish\_kumar2](#): > > Will you please also clarify about the margin impact on Short straddle /Strangle? Since these positions don’t have a defined max loss, the margins will remain more or less the same as it is now. You will have better incentive if you add a buy leg to your positions by bringing down your margin requirements significantly as well as your risk. [Next page](https://tradingqna.com/t/new-margin-framework-is-here-to-benefit-hedged-positions/70652.md?page=2)