Currently the banknifty lot size is 25. The spot is around 43500. The margin required to sell the banknifty 44000ce is Rs 126,627 and for the 43000pe is 1,35,092. On the call side this accounts for 5065 points and on the put side 5403 points. The avg daily movement in banknifty is less than 0.7% or 300 points. Requiring margin that covers even 1000 points should be more than sufficient. This would mean blocking 25,000 per lot. Instead the current margin is 5 times that. Hedging is not very useful for reducing margin required in case of spot ± 1.5% because the price difference net credit between the sold and bought position would not be much even for a 500 point hedge. I request someone from zerodha to share their view on this. @MohammedFaisal
its true from this January.
I have fallen back to nifty50 options trading due to this.
We see that annualised volatility of Banknifty is about 25% higher than that of Nifty 50. This explains the difference in margins as a % of the contract value.
I believe you are finding Banknifty expensive as it has moved almost 33% in the last 1 year while the lot size has remained the same, leading to an increase in the contract value.
NSE revises the lot size of all FO instruments every three months to maintain the lot size between 5 and 10L as mandated by SEBI.
If the average contract value over this quarter remains above 10L, there will be a downward revision in the lot size in July.
From a trading experience, even finnifty provides a higher margin exposure vs banknifty. When I put the suspecting hat on, I feel like NSE & cartel does it on purpose to nudge liquidity from banknifty → finnifty
@MohammedFaisal please provide the beta of banknifty vs nifty50 from this January. I strongly feel it will be lesser than 0.9 meaning nifty50 was more volatile. This should explain why the Nifty50 options premium x lot size gave more returns for the same capital deployed.
Yes only big players can sell options. Its like I own the bat so I will always do batting.