Hello,
The current margin for an ATM Bear call spread weekly option is around 25k. But right now, markets have become very volatile compared to years like 2017 where banknifty daily movement was like 200-300 points on an average. So when markets cool down and volatility goes down like 2017, would the margin of 25k too go down or would remain the same ? @nithin your experience would be an ideal reply.
Check the VIX chart
And yes, margins are a factor of volatility. Also last years mega spike would still have some residual effect when calculating margin requirements. If volatility goes down to 2017 levels, margin required will also go down.
Why does margin keeps changing constantly, I mean since exchange shares margin file four times a day why does I see margin changing second by second although not much but still it keeps fluctuating.
Also according to new margin rules I am observing that with increased volatility in a stock or it’s going on ban etc have much larger and exponential effects on margin then that was when I traded couple of years back.What’s the analogy for this.
Margin is span+exposure for overnight so as market goes up exposure margin part goes up leading to more margin
Premiums too would go down with that I guess, but overall ROI would improve I guess. @nithin One last question since I am doing some backtesting, if volatility does down to 2017 levels, by how much percentage would the current margins go down ? Any average ? Like if atm bear call spread currently costs 25k, would this go down to 20/18/15k too ?
Margin is span+exposure, span will be fixed till next session span file is updated, we update twice during trading hours, exposure is % of contract value, so as LTP changes total contract value changes and hence exposure changes so does margin. Also for future if there is any loss that will be immediately deducted from cash but not added when it is profit.
Few times one may see bump in margin after 3.30 when compared to before 3.30 because on kite at 2.30 we update margin file and after 3.30 exchange releases one at 3.45 and other between 5.50 to 6.
It can also depend on nifty value, currently nifty is at 15k, in 2017 it is at 8k levels, so that also should be considered.
Is there any rationale regarding this calculation. I mean , like since market is closed and we get closing margin file at 3:45 , then what’s the purpose for sending at 5:30 , i assume this could be maybe for global risk factors but are these done manually by altering the inputs in margin formulas.
I am not sure of this logic, will find out the exact reason and update here.