Thanks.
I have seen both and trade both.
Why are people suggesting premiums and roi will go down? Isnât option pricing independent of margin requirements.
Because these people are E-D-YETs.
But we shouldnât say that.
So I can say these people have wrongly interpreted the whole scene.
They thinking that more people will eneter the option selling business as margins will be less now. So there will be selling pressure and hence Option Prices will go down reducing Returns.
They are conveniently forgetting that even traders who were selling naked now will be enticed to buy options as hedge. So each participent will equally contribute to buy as well as sell.
Suppose majority were selling option of strike x earlier. Now they will be forced to buy option of strike of x-y. While for strike x sellers liquidity will be provided by the traders who are taking little bit more risk for more profits, by selling option of strike x+y. As they will now have to buy strike x options to hedge their positions.
So overall market dynamics will remain same.
Then what will change?
- In Naked selling slope of payoff is slanted more and BEs are wide.
Now in hedged strategies this slope is steep. So steep as it is harder to adjust than naked positions.
Due to this one can fall from total profits to total losses in a candel or 2.
This effect will be more and max near expiry. - Liquidity will increase which means less spread and less slippages.
- Theory is that you should not adjust fix risk strategies like ICs. Adjusting these strategies reduces max profit while increasing max risk many fold. Adjusting naked positions are comparitively easy and one can easily get some profits even after countless adjustments. This is not possible with hedged strategies.
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Will the New margin Rules bring any change in Premiums ⌠?
Nope. Period.
@MohammedFaisal What about my existing positions which I have already taken for June Expiry?
Will the margins for them will also reduce or do I have to square off and take fresh positions on June 1st?
Will reduce automaticallyâŚ
ahh, completely missed this point.
Kudos, Maddy.
while everybody is head over heels about new margin system, looks like I am the only one worried about increased cost basis. I gotta stick with naked positions with SL until brokers with fixed monthly plans catch up with Zâs infra.
trading hedged strategy will definitely make our brokers filthy rich, let alone adjusting it.
@siva-reddy @nithin @MohammedFaisal One suggestion : Please add weekly expiry options also in new margin calculator. It will really help us to make decision precisely.
For debit spreads , there is no risk. So ideally SPAN margin should be zero and only Exposure margin should be required (Rs 13238.8 for Nifty as shown in above sheet.)
MIS margins will be adjusted accordingly.
SEBI will not allow it period it leads to gambling in market
India does not have PDT rules like in USA which reduces revenge trading and over trading for small accounts
Down the line we might see reduction in exposure margin but it will definitely not go away
i feel exposure margin should be same as six sigma but not more than that
Sure, will check on possibility of adding.
New margins will apply for both existing and new positions.
When can we expect margin calculator?
Added samples to the sheet. Do check!
While SOMC goes away, Price scan range(PSR) is increased from 3 to 6 sigma, this increases the SPAN margins for naked option shorts.
Yes, for all positions were SPAN risk is lower than SOMC, there will be reduction in margins but this will be strikes that are very deep OTM.
Also exposure margins for deep OTM strikes will be 3% for index(10% away from spot) and 5.25%(30% away from spot) for stock options instead of 2% for index and 3.5% for stock options.
Have added an example of Nifty 10000 CE to the sheet, do check.
link to the sheet pls
oh okay, Thanks for adding it in the sheet!
pal post the link of the new sheet pls if you have seen