Strangle Margin for Nifty F&O

[Chandra_Reddy1]

I generally trade strangle with far OTM for weekly nifty options. I observed something strange today

Scenario1:

Sell NIFTY 21200CE for September month end expiry and sell NIFTY 18000PE 21st September weekly option

Scenario 2:

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.

[Meher_Smaran]

Hi @Chandra_Reddy1

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

How is the margin updated?

Hi @Roy As per rules stipulated by the exchange, An extra 3% extreme loss margin is applied for those deep OTM contracts which are more than 10% away from the previous day closing price of the underlying. Hence, Selling 17000 PE would require higher margin than say, 17500 PE which is still within 10% from previous day’s close. [image(1)]