Random Assignment of short CTM Position

F&O
1

Hello,

Can I be liable for Random Assignment even if I have a Short Straddle and one of the options ends up in ITM.

What are the probabilities of beings assigned by NSE.

Thanks for your help!

2

Yes, for your physical settlement obligation to be netted-off, both legs should expire ITM. If one expires OTM and another ITM, then there will be physical settlement.

Would suggest you check out this article, which explains this in detail.

3

@ShubhS9 thanks for your reply.

I got a message to day, ‘you have a long ITM position …’

ref same article, the margin required Monday morning would show in my Funds>Used Margin? Right now my available is comfortably more than LotSz * (UA Price*1.1) * .1 That should be fine, yes?

Also how does Zerodha treat margins for Position going in and out of ITM?

Thanks.

4

Hey @starttrade, Can you please post the message you received and the position you have?

5

The exchange charges physical delivery margins as a percentage of applicable margins (VaR + ELM + Adhoc) of the underlying stock which is levied from expiry minus 4 days for long ITM options. Explained here.

6

Hi @ShubhS9, can you please answer this, as per the support link, on T-4, i.e. incidentally today (Friday of the week before expiry), the exchange would have asked for higher margin (10% higher at 9:15 AM in the morning), but zerodha did not increase the margin (you only do it on Wednesday). So, in terms of reporting to the exchange if a per client check is done at 9:15 AM today - there will be a shortfall of funds for the client? Isn’t it? Is my understanding correct?

7

Abhijeet, this is applicable only for Long ITM Options as explained in the support article.

For Futures and Short Option positions, margin will increase to twice of SPAN + Exposure margin on last two days of expiry.

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8

Thanks @ShubhS9 for reverting.

Ok. Got it. Let’s keep “Futures and Short Option (Calls & Puts) positions” out of this.

Now, coming back to “Long/Buy option (Calls & Puts) positions”, kindly just answer me, if this is true or not?

Date Position Used Margin As Per Kite Funds Account Value Exchange Shortfall Reported By Zerodha Shortfall Penalty
22-04-2021 3:30 PM (T-5) 10 x CE BUY 150000 150000 0 0
23-04-2021 9:15 AM (T-4) 10 x CE BUY 150000 150000 15000 75

And if it is not correct, kindly fill in this table with correct values. It will go miles … Thanks in advance.

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