Here is the setup:
Buy 1 Lot Nifty Futures (current month) @ INR 17,000. Will rollover to the next month, every month until December 2022 expiry.
Buy 1 Lot x 17000 PE (December 2022 Expiry) @ INR 1000.
The margin required for this hedged setup is around INR 80,000.
Let’s presume I have 1.2L margin in my account.
Technically, the max loss in this setup is 1000 points (which is the value of the put) - and has already been paid for in cash.
Hypothetically, let’s presume there is a situation where the value of Nifty futures drops by 3000 points, and the value of the put increases by only 2000 points. In this case, my current P&L is -1000 points x 50 = INR-50,000.
So the fund balance here will be -10k.
Will the margin required for this setup increase / decrease as the price of the nifty futures increases / decreases? If yes, then any idea by how much?
Will I be charged a penalty for negative balance?
Will the loss in the futures be considered by the system as an MTM loss - and will the RMS square off my positions? Or will it consider the fact that my position is hedged with a put that will not expire anytime soon and keep my positions untouched?
- Can I buy Nifty futures with my pledged margin? (I’m aware of the 50-50 rule).