Using collateral for new positions

Just got this mail that says

You will no longer be able to take new positions using collateral margin if your cash balance is negative. This will lead to client trades being funded by the broker and there are regulatory restrictions on allowing clients to trade using broker’s funds in F&O. However, the existing derivative positions in your account can be carried forward for now.

So assume i have pledged liquid funds and have collateral margin of 5 lacs and I have a current trade that’s blocked 3 Lacs out of the 5 lacs.

Now assume my MTM is -5000 am I supposed to add cash equal to 5,000 if i want to take a new trade?

Because the faq that the link in the mail takes me to is

Which says

Although you can carry forward derivative positions with collateral margins, the exchange rules stipulate that all Mark-to-Market (MTM) payments be made in cash.

Is this for futures or for options as well?

Could somebody elaborate how this is supposed to work?


Assume you have just 5 lakh collateral only and no cash balance.
3 lakh blocked for the positions you have taken and MTM loss is 5000. Next day If you want to take a fresh position using the remaining collateral amount of 2 lakh you need to clear that MTM obligation of 5000.
You are allowed to exit the carry forwarded position. This includes all the segments.

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In option selling, there is no MTM losses, only margin blocked gets increased.

Is above also applicable to option selling, that I can’t do option selling only on equity collateral margin??

In Option selling there is no concept of MTM loss so your cash margin won’t go negative next day.
If you already have a negative opening cash balance caused due to some other trades and try to do fresh option selling using the collateral amount, it will not be allowed.

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Suppose I have 25 lacs collateral against equity and 10 lacs collateral margin against government securities. Will I be able to take position for 35 lacs margin in options or only 20 lacs will be allowed. Please answer for both intraday and overnight. @Ragavendran_M

It doesn’t matter if the collateral comes from equity or Gsec. 35 lakh you can use for option selling.
If you have a negative opening cash balance you are not allowed to take a fresh position.

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So what is relevant is the negative cash but not the available cash. If I take 22 lacs position my available cash will show minus 1 lacs but is due to 50 percent cash margin rule. Now next order for 13 lacs position will be allowed or not. I believe it will be allowed.

Opening balance is the column you need to check on the Kite funds page. If you have negative balance there, then only you cannot take fresh position.
The 50 % rule is applicable only while reporting margin to the exchange. This will not affect your trades.



I thought that this rule has been active on Zerodha since last few months. Why the notification only now? I remember unable to place trades on negative cash balance in early Jan 21.

Or is there a small change to any existing rule. Pls clarify.

No, this rule was live only from last week.

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Hi Sir,

Please clarify my doubt with one more scenario.

Suppose if my opening balance as on today morning has 2K and Available cash is showing negative and am trying to square-off existing short position say with 100 premium means 7.5K will be giving back which is ideally -5.5K will be my balance (-7.5K+2K). But am going to take new position by shorting with more premium which be finally in positive by tomorrow after settlement.

Here my question is can i take new short position immediately after square-off existing one?
Will the balance calculated immediately or only after the settlement say by tomorrow?

Please clarify sir.

You can take a position on the same day. The opening balance will be negative after the settlement.


Thank you sir for clarification.