Let’s say I create a Put calendar spread when Banknifty is at 49000 and Zerodha blocks a margin of 30,000 for 1 lot.
Now suppose Banknifty falls to 48000. As this is against the sold leg of my calendar spread, will the margin requirement increase from 30,000? If yes, by how much?
Awaiting response.
Even @Sensibull doesn’t show any margin variation when I shift the Banknifty slider left or right. Does this mean that margin remains the same?
Hi @paekut
The margin requirement will increase to the extent of the MTM loss in the short option leg
We’ve discussed this in detail in the thread below.
Thanks @Meher_Smaran . Though a few more points: [let’s assume we are talking about the Put Calender Spread which is a fully hedged position and hedge is not broken at any time]:
Here, Sam says that the position won’t be squared off. But in another thread, Nithin mentions that they can be [The superiority of spreads and their absolutely dismal state - #19 by nithin]
In one message in the thread you shared, Sam says that short margin penalty will be applicable. But in another he is saying that there will be no margin penalty. Can you clarify?
What happens at Wednesday EoD [around the end of expiry, let’s say at 3:25 pm] if the bought leg’s premium is close to zero. Will my position be treated as a naked sell? If yes, will the margin requirement increase exponentially?
“If the market is going up, it make sense to go with Put calendar spread. And vice versa [market falling, Call calendar spread better] .” Is this true? We are talking in terms of margin requirement not going up.
Just a feature request from @Sensibull - the margin requirement should correctly reflect the actual margin as we slide the market slider, I think it would give a better understanding of margin fluctuations before entering into a position.
Even if we take fully hedged position margin can vary based on time, vol etc, and upfront it is not possible to point out exactly how much it will vary.
If you can maintain 5k extra in this case where 30k is margin required it should solve 99.9 % cases, that is the reason why it is advocated always to maintain 10 to 15 % extra cash instead going all in.
If one leg is expired and other leg is open before 3.30 it means you are carrying one leg, if it is short then span and exp is required, if you don’t have you will be penalized accordingly.
As mentioned it is not possible to calculate margin based solely on movement multiple factors come into play, just maintain 10 to 15% additional cash and it will solve all problems.
Sure, thanks Siva. Maintaining extra margin is the way to go.
However, I am asking something different:
In the thread shared by Meher, Sam says that the position won’t be squared off. But in another thread, Nithin mentions that they can be - (The superiority of spreads and their absolutely dismal state - #19 by nithin)]
In one message in the thread Meher shared, Sam says that short margin penalty will be applicable. But in another he is saying that there will be no margin penalty. Can this be clarified?
What happens at Wednesday EoD [around the end of expiry, let’s say at 3:25 pm] if the bought leg’s premium is close to zero. Will my position be treated as a naked sell? If yes, will the margin requirement increase exponentially?
Here, I am asking what will happen at 3:25 when both my legs are open. Not at expiry.
“If the market is going up, it make sense to go with Put calendar spread. And vice versa [market falling, Call calendar spread better] .” Is this true? We are talking in terms of margin requirement not going up.
Feature request I made to Sensibull is something I still think is feasible. This is because all the parameters affecting margin [viz, IVs, greeks etc.] are already present on the Strategy Builder page and can be tweaked to desired level, to see the actual margin.
Simple rule you have to note down.
If you maintain span and exposure all the times there will be no penalty, you can ignore everything else.
Also no one can predict span based on movement so not possible for sensibull to show upfront margin required at different levels.
Sure, thanks for your input. However, this is not the answer to the queries.
@Meher_Smaran awaiting your response.
I have already spoken to sensibull in the past something regarding this, they said option greeks are dynamic during live trading and hence during non trading hrs what you see is only for that specific Index value.
They cant do anything here as again its dynamic, so changing slider won’t work.
During extreme movements Volatility will increase, and margin requirement will increase too especially in case of credit spreads. You never know, in fact no one knows how much will be the margin requirement, so only safe way is to have extra margins .
trust me 10 to 15 is not at all sufficient, you need 20% atleast as balance margin.