SPAN margin for a hedged postion

Check this: http://zerodha.com/z-connect/tradezerodha/zerodha-trader-software-version/zt-spread-orders . Yes you can also place the calendar spread manually, but it will be 2 orders instead of 1.

Hi Nithin,
Is it possible to say block only the required(maximum loss possible) margin when all the positions are hedged and as soon the user tries to come out of one position, to block more margin(Actual margin required for Non-hedged position)? In this way, we can account for the execution risk. Yes, then there is a rick of not having enough margin when user tries to exit, but we can have negative margin or we can Reject the order saying not enough margin available…
I guess currently it is not there. But, can you please consider including this kind of a feature. It would be such a boon for hedged traders especially with less captial…

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my uncle in US says the margin is not needed but only net premium required for bull call spread or bear put spread. but here in india ZT asks margin like futures for sell leg :confused:. it is basic risk management not letting the user to place long leg unless margin or short leg is covered. it is nicely done in even comission free robinhood trading. wish ZT has similar thing!

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Hi Nitin, i have a question on margin requirement , i am selling a yesbank 20pe of feb2020 and the lot size , and if it reaches 20 i would like to those shares at 20.
So in worst case i need 20*8800 as margin but the margin calculator shows 283000 instead of 176000

For options shorting exposure margin is calculated as below

"The exposure margins for stock options

  • For option contracts on individual Securities:
    The higher of 5% or 1.5 standard deviation of the notional value of gross open position in futures on individual securities and gross short open positions in options on individual securities in a particular underlying. The standard deviation of daily logarithmic returns of prices in the underlying stock in the cash market in the last six months is computed on a rolling and monthly basis at the end of each month.

For this purpose notional value means:

  • For an options contract - the value of an equivalent number of shares as conveyed by the options contract, in the underlying market, based on the last available closing price."

Copied from NSE site, can check that for more info on margins.
That way of calculation gives exposure margin of around 30%, also as yesbank is under ban due to MWPL limit it has higher exposure based on the slab of MWPL it fall.
image
Can download full circular from here, no 31685.

Hence it is charging much higher exposure, you logic is theoretically correct but practically exposure is charged based on various other factors, hope this answered your query.

If I sell 1 lot of Nifty May future and buy 1 lot of 9600 CE (May) then Margin required is 50,605 approx.
I have only 60K in account, how can I enter this strategy?
Should I buy 9600 CE first and then sell future or other way round.
Because if i sell Future first then the margin for selling is 1.37 lakh so I would not be able to execute it.
Can anyone tell me is my assumption correct

Pls look at how tastytrade in usa executes the option strategy and how they mitigate the risk try to impliment that it would be great-they have some great system

Yes, buy option first, always.

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We have seen it, once this new margin thing is implemented we will do some decent changes on entering and on execution of strategy.

Thank you may good bless you all tc :pray::innocent: keeping my fingers crossed it happens asap

I have question,
today i have done Double Diagonal Calendar in mis order, after trying to carry forward position and failed due to margin requirement, pls answers this ?? my position completely hedge, pls find attached screen shot of my position tdy i have done, ignore yellow color position that was intraday,

Margins Calculator showing 39k , But at a time i have in may account 72k,

Hi Zerodha ,
Please advise, if we have a hedged Futures position which was achieved with margin benefits via Zerodha Basket by having first Long Put ITM Option and then Long Futures , all same month expiry and same lot… below are the 3 questions

  1. if we exit the Long Futures first either due to GTT stop loss / stop profit or manual exit and then 2nd Long Put ITM Option manually-- no margin shoot up or penalty right?

  2. But if we exit the Long Put ITM Option first manually (once Futures targets are achieved) and then immediately exit the Long Futures – for few minutes there will be margin requirement increase because Long Futures will become naked and for those few minutes will there be any margin penalty?

This 2nd scenario is incase the Long Put ITM Option is very less liquid then we need to exit Long Put ITM Option first because if it do not exits then we have to maintain the Long Put ITM Option and Long Futures till expiry so that both gets netted off with each other, ofcourse with some loss or may be some profit but at least no physical settlement obligation?

  1. Incase any hedged Long Futures position with Long Put ITM Options – how the net off happens it happens automatically and next day after the current month expiry the trading account will have the final some loss or may be some profit?

Right, the margin wouldn’t shoot up in this scenario and there won’t be any penalty.

Yes, there can be margin penalty. Exchange now takes 4 snapshots of positions during market hours to check whether adequate margins are maintained. If it is taken at this moment, there will be peak margin penalty.

So it is best to always first exit high margin (Futures, Short Option) position first and then long option position.

Right, the obligation will be netted-off and you won’t have to give or take delivery of underlying shares.

The net-off happens automatically, you don’t have to do anything. Any profit/loss you make will be available for trading from the next day.

Hi Zerodha, please advise

Q1) In case of hedged position Long Futures NRML hedged with Long Put ITM Option NRML – if the price starts falling freakingly so I will be covered by Long Put ITM Option NRML however to recover some more loss if I Short Call OTM Option in intraday not NRML - will it nullify the Long Put ITM NRML and my Long Futures NRML will become naked and hence the margin requirement will shoot up or this will not happen, or intraday will not affect the NRML hedged pair?

Q2) Long Put ITM Option NRML was 1st row and Long Futures NRML was 2nd row at the time of entry - so which leg order was executed first during position making, doesnt have any issues on the physical net off, this still holds good?

Q3) Whenever in any hedged position like Long Futures NRML with Long Put ITM Option NRML if we buy another Long Put ITM Option NRML and then sell the old one, will not sell till the new option is bought, will this also shoot up any margin for few minutes or no affect will happen as for few minute Long Futures will be over hedged only, please advise?

Q4) Whenever in any hedged position like Long Futures NRML with Long Put ITM Option NRML if we buy another Long Put ITM Option NRML and then sell the old one, the funds released by selling the old Long Put ITM Option NRML comes immediately and 100% to trading account and they can be used for same day any Intrday F&O / CNC and for Overnight F&O / CNC, please advise?

Q5) M2M of Futures gets in the trading account funds same T day by end of day , meaning before next day market opening and then they can be used for Intraday and overnigth for both F&O and CNC?

Q6) If we dont use Basket Order and first buy the Long Put ITM Option NRML same stock same month expiry via GTT or manual and then second we buy Long Futures NRML same stock same month expiry via GTT or manual will the margin reduction benefit be available for Long Futures NRML or its available only in Basket Order?

Q7) What happens in case of CTM 3 strikes rule - Call Options will become CTM which are 3 strikes below the expiry day stock price and 3 strikes above the final stock price as CTM Put Options. will they be also liable for physical settlement Long (call or put) and Short (call or put) positions both?

This won’t break the hedge as your position is in MIS. Though, you will require full SPAN + Exposure margins to take a short position.

No, it doesn’t matter in which order the orders were executed. Your positions will be netted-off.

This won’t increase the margin requirements as hedge is already in the place.

Funds received from selling options can only be used for buying options on T-Day. For all other purposes you will be able to use the funds from T+1 day.

Right. MTM profit from Futures position will be credited to your account on T+1 day and you can use it for any purposes.

Yes, it doesn’t matter how you take the position, you will get the margin benefits.

NSE has discontinued DNE (Do Not Exercise) facility for CTM contracts. So these contracts too are compulsorily physically settled.

@ShubhS9

Please advise apart from ITM options getting cash settled in indexes (BankNifty, Nifty) and delivery settled in stock, a) what does CTM Close To Money options mean with any made up example for index and stock b) what does this CTM will do , will they be treated as ITM and cash settled for index and delivery settled for stocks ,if they are like ITM why this separate name CTM is there any difference between CTM and ITM?

@ShubhS9 Hi Shubh please advise

  1. In Zerodha MCX Curdeoil trading the zerodha margin calculator shows the hedge benefit when trading for example 1 lot Long crudeoil future + 1 lot Long Crudeoil Put- but the same is not shown in the basket margin requirement (like its shown in equity options)

  2. Can you please advise in MCX crudeoil the expiry is how many days before the mentioned date on the contract for future and option like Expiry minus 2 days or Expiry minus 3 days and b) how many days before that actual day of expiry E-2 or E-3 Zerodha increases the margin for Future, Option Sell or Option Buy position

  3. on expiry all options before ATM will become zero in crude oil?

  4. Is there CTM concept in crudeoil like 3 ITM strikes from ATM will be also taken as worthless?

  5. If any option long or short expires ITM or future is not squared off then its cash settled and automatically the net profit and loss will get adjusted (is it advisable if one is in profit to let it expire especially in crude oil)

  6. Zerodha Margin calculator on website shows significant reduction in margin in case of crudeoil on MCX Future hedged with option buy but same doesn’t reflect in basket order margin requirement?

Hi @Alpha_AA

  1. Can you please advise in MCX crudeoil the expiry is how many days before the mentioned date on the contract for future and option like Expiry minus 2 days or Expiry minus 3 days and b) how many days before that actual day of expiry E-2 or E-3 Zerodha increases the margin for Future, Option Sell or Option Buy position

a. For crude oil future & options contracts, we don’t square off till the expiry date if you are maintaining sufficient margins.
b. for crudeoil futures the tender period margin is increased 5 trading days prior to expiry day click here

  1. on expiry all options before ATM will become zero in crude oil?

yes

  1. Is there CTM concept in crudeoil like 3 ITM strikes from ATM will be also taken as worthless?

No

5.a. If any option long or short expires ITM or future is not squared off then its cash settled and automatically the net profit and loss will get adjusted
b. is it advisable if one is in profit to let it expire especially in crude oil

a. yes, the crude oil contracts are cash-settled. The P&L will be updated on the ledger.
b. :zipper_mouth_face:

@ShubhS9 / Zerodha team / @Shiva_ms - need one advice, since now stocks settlement is T+1 day

Q1)- while buying any new stocks for overnight delivery- how much approx % funds is needed on this T day of buying and balance amount one can deposit in how many days – is it T+1 day morning before 3pm or by T+1 day end of day before 11pm

Q2) Stocks settled and in demat- —> If we sell holding stocks which are already in demat-- T day -80% funds available from selling on T day can be used to take same T day new stocks delivery overnight or F&O positions overnight or only allowed for intraday trades, and if its only intraday - > is there a penalty if delivery overnight is taken on this T day for new stocks or F&O positions overnight

Q3) Stocks in transit and is T+1 day —> If we sell these stocks which are in transit on T+1 day which have yet to come to demat on T+1 end of day-- approx how much % of funds will be available from selling on T+1 day morning and can it be used to take same T+1 day new stocks delivery overnight or F&O positions overnight or only allowed for intraday trades, and if its only intraday - > is there a penalty if delivery overnight is taken on this T+1 day for new stocks or F&O positions overnight

Q4) Squaring off intraday or old overnight position-> option sell position CEorPE / Futures Long/Short position- all funds released can be used to do anything - new stocks delivery, new F&O positions overnight, intraday-- is this right , please confirm?

Q5) Squaring off option buy position CE or PE intraday- all funds(original amount + profit) released can be used to do anything as its intraday option buying , also original amount and not the profit can be used to anything or its also not allowed (anything means = new stocks delivery overnight, new F&O positions overnight), – please confirm? if not then is there a penalty if delivery overnight is taken on this T day for new stocks or F&O positions overnight

Q6 ) Squaring off option buy position CE or PE old carried forward overnight position- all funds(original amount + profit) released can be used to do anything , also original amount and not the profit can be used to anything or its also not allowed (anything means = new stocks delivery overnight, new F&O positions overnight), – please confirm? if not then is there a penalty if delivery overnight is taken on this T day for new stocks or F&O positions overnight

For buying stocks for delivery, you will need the full amount ie. price * quantity.

You can use the proceeds received for delivery trades as well both for equity and F&O.

80% of the sell value of the proceeds from selling T1 holdings (stocks bought the previous day and yet to be credited to the demat) can be used to buy new stocks for delivery. However, only 60% of this selling value can be used towards F&O. To learn more, see: Update 4th Aug 2020 - Margins for trading stocks & Intraday leverages

Yes, this is right. However, any intraday profit you make will be available only on T+1 day.

Initial capital will be available for trading in any segment. The intraday profit however will be available only on T+1 day.

No, the premium received from selling option can only be used for buying options on the same day. It can be used for all other purposes from T+1 day.

You can also read this article for more details:

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