Query on ELM margin

[psmp]

I noticed that the additional 2% ELM margin as per new SEBI regulations is getting applied on call and put spreads (both legs are of the same expiry). I thought that this additional margin was only for naked short sellers. Can someone from the team or otherwise advise if this is expected? Where is extreme loss scenario in a spread?

[dtyxg]

@nithin @ShubhS9 @Meher_Smaran

Pls confirm the margin requirements are tooooooo high

[Meher_Smaran]

Hi @dtyxg @psmp

Margin requirements for hedged trades up by 80%!

This isn’t an issue specific to Zerodha. An additional 2% margin is being blocked for all short positions irrespective of whether the position is hedged or otherwise. This is as per the recent SEBI circular: [image] The increase in ELM by 2% is on the entire contract value. So for every lot of nifty option being written (assuming nifty is at 23000, lot size 25), margin will go up by ~12-13k. Also, from February 01, the margins will rise further since the calendar spread benefit will go away…

[dtyxg]

I am doomed

[psmp]

@Meher_Smaran @VenuMadhav Thanks for the clarification.
Yes, the SEBI circular seems to not distiniguish between short positions of any kind. Spreads and their variants are no where close to gambling. They infact can only increase market efficiency at the least. SEBI is either ignorant or stupid, it is like solving a mosquito problem with a tank

[dtyxg]

@psmp

SEBI is either ignorant or stupid, it is like solving a mosquito problem with a tank

Nice analogy

At the same time my returns will also tank now🥲

[pavinjoseph]

@dtyxg

At the same time my returns will also tank now🥲

Don’t trade 0 DTEs?

[dtyxg]

I trade only 0dte

[pavinjoseph]

That sucks, the new rules definitely feel like curbing the 0 DTE madness!
Personally I have nothing against peeps trading 0 DTEs, saw a guy on Tasty’s Rising Star segment who made a lot of money scalping 0 DTEs, should’ve seen the look on Sosnoff’s face (who’s an option seller for context)