Good evening Sir…
It is very difficult to execute any strategy due to restrictions of Zerodha to a very narrow price band. May I know what is the reason behind it? As I’m intending to execute Iron Condor, to protect from unlimited loss as well as to get merging benefits but it is next to impossible to implement this strategy due to very small price range allowed in Zerodha… Kindly have a look on the attached screenshot. Kindly guide me how to execute this strategy without sacrificing the margin benefits. Please…
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This is because, The positions of a trading member are capped at Rs. 500 crores or 15% of the overall market Open Interest (OI) , whichever is higher. Since many Zerodha clients actively trade and maintain positions in index options, the allowed trading range is restricted to keep the OI utilisation within sanctioned limits.
If you have sufficient funds you can first take Short Position outside the allowed range, which will allow you to Buy an Option that is outside the allowed range.
Do ICs/spreads considered as 0 OI?
That means, in no way there is any scope to get the margin benefit… But, how the other brokers like Upstox, are allowing the traders to take long positions in deep OTM before shorting and giving quite a good margin benefits.? The margin benefits matter a lot for ROI to a trader… If Zerodha fails to provide this benefit, there is obvious reasons for moving forward of the traders towards the other Brokers… I think Zerodha must take this issue seriously and come forward for the benefits of the traders. I beg your pardon if it may have displeased you. Your kind response is awaited.
Regards.
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You will get margin benefit, but not beforehand.
To execute Short position first you will need full margin, Once you execute Long position, you will get margin benefit.
Already explained to you above why there are limitations on buying deep OTM Options.
Seriously I could not get your point… Can you explain with some illustrations…
Q1. Is this restriction imposed by NSE to all of the member traders of all the brokers like Zerodha?
Q2. Is this very limited price band allowed for the Zerodha traders only… And other price bands are for rest of the brokers?
Q3. Is this narrow band allowed by Zerodha for the retail traders and the wide spectrum is allowed for the Institutional traders or the operators?
Q4. Do I have to trade of Rs 500 cr or more for getting the wide spectrum of the strike price…
Kindly clarify…
It’s a bit tricky one. That means after execution of all the legs I will get the benefits and with that benefit again I have to execute another round of the same trading strategy… Otherwise I have to make ready quite excess fund for trading. In this way I could squeeze a little benefit… However, a straightforward method would help the traders to take position with a limited amount of capital… Anyway, thanks for clarification and enlightening me…
Yes, this is imposed on all brokers, but Zerodha being largest broker hits this limit, hence there is limitation on strikes allowed for Buying.
Not the case, As explained above, as Zerodha hits exchange given limit, limitations are enforced.
No, the limitations are same for every trader.
No, you don’t have to do that.
hey, I asked you something? plz answer
I couldn’t get you… Could you please elaborate it?
No, they aren’t.
Here also I have a doubt on whether the benefit will be availed in this process… As Zerodha varsity suggests to be long first before shorting for availing margin benefit… Sensibull also strictly ask to execute the long position first to avail margin benefit… But your thought is quite opposite to them. Am I missing something here?
I asked @ShubhS9 actually.
Do spreads add 0 OI to zerodha’s count?
If a trader buys 1000 lots and sell 1000 lots of another strtike. Do this add to zerodha’s OI?
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Ohh… No Idea… Anyone from Zerodha might clarify it.
Thanks.
See, if you have limited funds then it is advised to Buy first and then Short, but if you have sufficient funds, you can Short first and then Buy later, in both scenarios the margin benefit you will get after execution of both legs is going to be the same.
It adds, but higher of longs/shorts are considered, so almost all the times longs will be more with us, hence we don’t restrict short on any strike.
@siva that means the above spread will add only 1000 lots to the Zerodha OI. Then when you introduce basket orders you should allow all strikes as the person buying is simultaneously shorting. If trader only short 1000 lots, you allow. But if he buy to hedge then that doesn’t add any further OI. So you should allow entering deep OTM spreads as well.
Not possible, only after short position is in system, longs for that quantity is allowed on any strike.
@siva
If no reliable solution is provided to this at the earliest then we will be at disadvantage.
Many brokers provide service called “slicing” orders, where even if orders are treated as one for brokerage calculations they are sliced in predefined chunks and fired. this is mostly done to bypass max lot size restrictions. You can do something like this. If trader has 5 lakh margin that means 4 lots short possible. So RMS can automatically slice and fire orders from basket sell-buy sell-buy so that efficient utilization of margin can be achieved.
Also,
the statement
I think, is not impelemented by exchanges. This is Zerodha’s internal mechanism wherein you block buy positions. So you can certainly change this for basket orders where person is taking spreads.
Tell me if I am wrong, but if a trader who has existing longs, create short positions later, then exchanges surely wipe out equivalent OI from Zerodha’s quota. So, First short, then long is zerodha’s idea.