I generally trade strangle with far OTM for weekly nifty options. I observed something strange today
Sell NIFTY 21200CE for September month end expiry and sell NIFTY 18000PE 21st September weekly option
Sell NIFTY 21200CE for September month end expiry and sell NIFTY 18500PE 21st September weekly option
My expectation was that Scenario1 margin amount should be less that Scenario2 as down side I am writing PE at higher value. But Scenario2 Margin was lesser. I couldn’t get how this works.
This is due to the 3% extra extreme loss margin which is applicable to those OTM contracts which are more than 10% away from previous day’s close. You can more on this in the below post