Tricky interface of Exchange penalty for inadequate margin and interest charged on cash deficit

Hi, I was trying to understand a practical but tricky interface of re-utilisation of released margins on a squared off FnO trade, exchange penalty for margin shortfall and interest charged by zerodha for cash/equivalent shortfall. I’m putting my understanding in following points by giving an example:

  1. Suppose I squared off an option position in SBIN today.The margins are released, and are shown immediately in kite(am I right?), But they are not available to take fresh positions till T1 day.

  2. If I take another trade in xyz scrip same day and margin is “actually” not available, I will be charged certain amount by exchanges (~Rs500?) for margin shortfall.

  3. If still somehow, margins pledged by stocks are available, but there is lesser than 50% obligatory cash, there won’t be any exchange penalty, but zerodha will charge 0.05% interest on cash/equivalent shortfall.

I request for comments whether my understanding is right.

@siva Can u plz!

Funds are released immediately to your account.

Regarding taking fresh overnight positions with released funds: If you sold shares or squared-off long Options position then you should wait until settlement happens.

If you squared-off Futures position or Short Options position then you can use the funds released to take fresh overnight positions.

You can use freed up funds for Intraday trades, there won’t be any penalty for that. For overnight positions there will be a penalty, Penalty is charged at 0.5% on the money you are short by.

Yes, interest charges will be 0.05% per day.

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Thanks @ShubhS9

@ShubhS9 I always use margin released from take fresh short option or future positions to take overnight positions in FnO but I don’t think I am charged margin penalty or interest on that.

Me too used to do the same till I got ~500 rs penalty once for 3-4 days consecutively limiting the profitability of trade which I took. The worst part is that there is no notification for this- this went on un noticed for few days. It was shown ONLY in console of zerodha in one of the tabs of funds which I opened accidentally. Since then, ive made a habit of looking at it periodically. I don’t know where else it is shown/notified in a more easily noticeable way.

Had this case in mind, so better to be cautious.

This might be case for buying options but I don’t think it is same for short options positions.


If we are selling shares or covering your long options , then you should not use that funds to take overnight positions .

If we are covering our future positions and option shorts , we can use that released margins for taking overnight positions.

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I beg to differ.
If selling stocks wait till T2.
Squaring long positions: why will it release margins? (May be -T1, -T2 to expiry in deliverable positions where brokers mandate margins).

For margins released by squaring future positions or shorts in options, intraday is ok but for overnight positions wait till settlement that is T1.

I can bet my home that whatever I told is correct

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Till today I’m following the same didn’t incurred any penalty.
as futures/writing options only blocks margins but buying options/stocks in CM leads to paying of margin. That’s why it’s also not allowed with pledged margin.

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i m doing spreads in nifty positional , if nifty goes up or down , i do adjust …
i did 4/5 in the last 1 month :wink:

Switch out from Zerodha. The penalty amount also is entered in the funds statement after 8-10 days. It is not traceable in contract notes or bills also… Extremely difficult to connect all the reports and identify where you went wrong. Mt balances have always been positive as shown in the dashboard at the end of the day, after 10-days I get an entry of penalty with the ledger posting backdated - it is illegal too…(If you are posting a ledger entry today, you can’t mention the posting date of 10 days ago)