I did an option selling on 31.05.2021 (14900 PE 3rd June ), since i was practising i just did one lot and tried to squire off on 01.06.2021.
In Zerodha It asked me to buy back (The profit was showing as 130 Rupees). When i clicked buy the system asked for the margin of 300 rupees and i did it. Then In my funds section its showing used margin as 300 RS.
I am confused with this amount and my question is
Whether i have paid 300 additional to square off my position?
Will that bring this transaction to negative profit (130 (Profit)-300 (Margin))
3.How this margin is calculated? how is different from the one which is accounted while selling?
I just want to understand why the system asks for margin of 300 rupees while buying the options which i sold a day before.
When you sell, the premium you receive eventually comes to cash. Your cash is part of overall margin.
On kite you see profit, which shows what the profit is if you square off (which is buy back).
This profit can only be realised if you use funds to buy back.
Premium received is 430 while selling
Option price currently is 300 and profit is 130. This means, to realise this profit, you have to square off (buy back) at 300. All mentioned figures have to be multiplied by the lot size ofcourse.
Siddharth, when you take short option position you receive premium (Price * Lot Size, which will be added to your available cash. Now, when you are buying back the same option, you’ll have to pay the premium (Price * Lot Size).
Eg. You took short position in Nifty 16000 CE at Rs. 200, you’ll receive premium of Rs. 15,000 (200 * 75), this premium will become part of your available cash.
Now after few days, you decide to buy this option back, let’s say at Rs. 100, you’ll have to pay premium of Rs. 7,500 (100 * 75), which will be debited from your account.
The difference between the premium received while taking short position and premium paid when squaring-off the position will be your P&L.
Adding one more query, if you could please help me.
I have used 5 Laks for options selling at various strikes. The premium i have received is Rs 29800.
The problem is i have forgot to keep track of the existing money in my account. I have bought few stocks recently and used some capital.
Today morning since the market was positive my available cash shown Rs 22000, suddenly when the market fell second half of the day my available cash is showing as Rs -5400. ( I have not added any cash or withdrawn after starting my options selling)
I understood that i have used the money (Premium) received from options selling ,so to exit the existing positions i am not having enough money so i have to add again.