New margin framework is here - to benefit hedged positions

Trading Announcements
24

@nithin beautifully explained… crystal clear… THANK YOU FOR PUTTING ON THE EFFORT… and CONGRATULATIONS… :slight_smile:

MAY GOD BLESS ZERODHA WITH DEEEEEEP POCKETS :stuck_out_tongue:

25

Yes, margins will be lower for such strategies too.
However, margins will go up close to the expiry as one of the positions will be exposed. If you roll over correctly, you can maintain the position utilizing the margin benefit fully.

26

There are no restrictions on trading limited strikes at Zerodha, so you can use any strategy possible using European options.

27

@nithin

Please give numbers for spreads on individual stocks… That is the only example missing in your image…

That will complete your post

28

Plz reply to my query
@MohammedFaisal, @Sensibull

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

29

You can refer to point 1.2.5 of the circular concerning Short Option Minimum Charge(SOMC). With this circular SOMC has been completely removed.

For instance, you want to trade a bear call spread(Sell Nifty 12000 CE and Buy Nifty 12200 CE), as long as both the positions are held together, the spread will have a max loss 15K(as per 6 sigma).

Your margin requirments with this policy will be max loss + exposure margin(2%) around 33K.
Previously, your margin will be higher of max loss or SOMC(5% of contract value) + Exposure margin(4.24%) which will be around 1L.

3 Likes
30

If you take the buy position first and then enter the short position, you will have the pay lower margins as our RMS recognizes that the portfolio is hedged.

2 Likes
31

@MohammedFaisal In the bear call spread the proposed risk + exposure don’t make 25000 …is it ok …please can you check ? (15721.5+18120=33841.5)

32

How new margin system will be implemented in Zerodha platform , Ex, in case of Bear call spread , if i sell Call first , say if i sell ATM call first & than buy OTM call

33

Will this reduce the option price? I’m worried about the ROI on my strangle strategies

34

@Arpan, my bad, have corrected it to 33k

35

@MohammedFaisal in that case what will be the margin for 12000 CE(short) and 12100CE(long)…?

36

So the infographic at the top of this thread is also incorrect: for bull spread?

37

yes for 12000 and 12200 bear call margin needed is 33000 for 12000 and 12100 bear call i guess it’s 25000

38

Thanks nithin! Currently we get margin benefits that can not be withdrawn but used. Is that margin benefit can be withdrawn and how to place all orders simultaneously. I assume brockers will change interface.

39

How is the margin affected for a calendar spread - Ex: sell monthly and buy weekly ?

40

@nithin @MohammedFaisal Hii. Will Covered call using Index Bees ETF get any benefit under this ? Since the position is totally hedged.

1 Like
41

@nithin @siva can u please check new margin for bear call spread…is it 25k or 33k?

42

Let it be either of the above, we tried giving close approximation to proposed margins and new proposed margins will be implemented from may 1st. In coming days we will be able to provide more details.Just give it sometime.

1 Like
43

Must be 33k.

In that case, the correct PC. Reduction is 60.36% for the spread… Not 70%…

:crazy_face: