I’m trying to do a Synthetic Long Call Strategy on the NIFTY Index. I can buy calls without a margin requirement but I can’t sell puts without one. The loss will be limited to the initial credit received from selling the put, as you also hold a call option that allows you to buy the stock at the same strike price. Then why is there a margin requirement this high?
Why is it that the broker can’t seem to assess that if there are losses it is limited to initial capital and normal margin requirements aren’t required? I tried using AngelOne, Zerodha and Groww in India. Any ideas on how to circumvent this?
C-P is a synthetic future so the loss isn’t limited to the initial credit. If market goes to 0, the Put will be 21000 so your short put position will incur significant loss.
The probably of the market going to zero very low in my opinion. I understand that may apply to stocks but indice options are different right? Correct me if I am wrong. The probability of the Nifty going to zero in a week is probably less than 1%.
Yeah. I mentioned zero since it helps to understand the extreme case and why margins are implemented. For e.g. when you buy an option, your extreme case loss is simply the option price resulting in no marign requirement but when you short an option, your extreme case loss is theoretically unlimited, leading to a margin requirement.
