Option Selling and margin

F&O
1

Hello All…
Suppose I wish to carry overnight position in option selling.
I pledge mutual fund for cash collateral. There is no Equity Collateral. Is there any penalties I have to paid?
For Example- Required Margin is 80000 and Cash Collateral from pledging of debt mutual fund available is 95000.
Thanks.

2

Hey @Rohi51

The exchanges require that 50% of the margin for F&O positions must be in cash or cash equivalent collateral, while the remaining 50% can be in the non-cash collateral margin. In case there is no cash, interest at 0.035% per day will be charged on the cash component funded by Zerodha.

You can pledge liquid funds which can be considered as cash equivalent securities.

You can check on this link to learn more about pledging.

3

Thanks for prompt reply. Is it possible to BUY option from cash collateral component?

4

The collateral margin can be used for intraday equity, buying and selling futures, and selling options. However, for buying options you will need to maintain cash in your account.

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5

Thank You Sir.

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6

Hello Sir.
Good Evening.

  1. Is every Govt Sec Bond is Eligible for pledging? I mean every 3 year/5 year duration Gsec can be pledged?

2)Can you also tell me Which instruments is most secure for investing and getting cash collateral purpose? Debt / Liquid Mutual fund or Gsec?

Thanks.

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7

SGBs also may serve as collateral for margin requirements, provided they are included in the approved securities list eligible for pledging.

You can refer to this sheet for the list of approved instruments that can be utilized as margin collateral, along with the haircut percentages.

8

Good Morning Sir,

My query was regarding Govt Secure Bonds Not SGB…
Thanks.

9

@Rohi51

ahh my bad !! The same list contains approved G Secs as well which can be pledged.

10

@KarthikAcharya
If the interest is charged by Zerodha, under what heading does this reflect in account statement

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11

You can check for “Delayed Payment Charges” in the ledger.

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12

My margin suddenly turned negative today morning. SPAN margin blocked on Friday EOD as per funds statement in console, shows about 45 lakhs, while SPAN margin shown in Kite, in the funds page, shows around 63 lakhs. Why this huge discrepancy between the both and how come SPAN margin requirements increased suddenly on a trading holiday?
@nithin @KarthikAcharya

13

Hi @Roy, this was fixed in the afternoon itself. Sorry for the inconvenience caused.

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14

Is there any upcoming change where you can not do intraday trading for collateral margin you have received for trading in FNO
So basically now 2 separate pledge require - one for intraday and another for fno?

15

Hey @curiousvi

There are no changes made where you need 2 separate pledges.

Once you have pledged these margins can be used for equity intraday trading, futures & options writing (equity, commodity, and currency F&O) .

16

Should 50% cash component be maintained only for overnight positions or for intraday too? Can the 100% of margin come from non-cash collateral for intraday positions?

17

Hey @Anil_Kuppa

For intraday trades, you can use 100% non-cash collateral, no cash is needed, and no interest is charged. But for overnight positions, at least 50% must be in cash; if not, you’ll be charged interest on the shortfall.

1 Like
18

Hi
i.e, Im having zero ledger balance,and having 1l pledged margin limit ,used to take overnight position worth 50k and hold for upto 20days and positions manages in between the margin so will i occur only non cash of 50% interest charges right.

1.What happens if i do every month no more cash in ledger and no negative ledger positions goes beyod the limit available from the pledged margin?

2.If 1l limit goes negative and my ledger turns negative and will be charged for DPC as well as interest for non maintaining 50% cash right?

19

Hi @KarthikAcharya

Is there a notification of the shortfall of cash component for overnight positions?

20

Hey @im_bala

Scenario 1 – You stay within 1L limit and no negative ledger:
If your total margin usage (overnight) stays within ₹1L and your ledger never goes negative, then:

You won’t be charged DPC (Delayed Payment Charges).

But 50% of margin has to be in cash as per SEBI rule for overnight F&O positions.

Since you have 0 cash, we will fund the 50% cash part and charge you interest for the non-cash shortfall ( 0.035% per day on shortfall).

So yes, only non-cash collateral interest applies if ledger is clean.

Scenario 2 – Pledged limit overused and ledger goes negative:
If your margin requirement exceeds ₹1L and your ledger turns negative:

DPC will apply to the negative ledger balance charges 0.035%/day shall be levied.

On top of that, if you still don’t meet the 50% cash rule, non-cash interest continues too.

So in this case, you pay both:
DPC for negative ledger
Interest for non-cash collateral shortfall