Hi, I have received collateral margins from pledging shares and used this margin to sell a call . Now, on Monday during expiry week, the option is loss making (price has breached strike). I have not unpledged the shares yet. To square off the option, would I be asked to post cash? After squaring off I will unpledge and sell the shares and make a profit on the overall trade.
If its an overnight position, As per regulations, 50% of the margins blocked for overnight derivative positions has to come in the form of cash or cash equivalent. The other 50% of the margin requirement can come from other non-cash equivalent collateral margins (margins received by pledging liquid funds are considered cash equivalent).
You will be able to unpledge your pledged holdings only to the extent of the unused collateral. The unpledge request will be rejected if the collateral is used for the positions taken. In such cases, you will either have to bring in cash or square off your position to be able to unpledge your pledged holdings. If there’s a negative balance in your trading account, the negative amount needs to be cleared before placing the unpledge request.
Hi Meher, that is a great explanation, sorry to keep asking more questions haha, So taking your below example, off I do unpledge my balance 80k unused collateral, will the 20k loss be adjusted by the broker selling 20k worth of my shares?
If you have traded with Collateral margins & incurred a loss, you will need to bring in additional funds to make up for the MTM loss. In case you don’t the RMS team could sell your pledged shares to make up for the loss.
This support article explains the full process in detail :