What is the Span margin, exposure margin and total margin in options?

when i went to look for the margin required in zerodha margin calculator for buying below:
NIFTY 23feb 2017 buy call option
strike price 8800
net quantity= 75
the page says initial margin= NA
total margin= NA
Why this NA showing and not showing margin required?
do the premium we pay is considered as the margin and no margin is required?


Just like buying equity for delivery, Option buying requires full cash and it does not require a margin. One has to pay the entire premium amount to buy an option. This is why the margin reflects as ‘Not Applicable’ for Option buying in the margin calculator.

Unlike option buying, a margin is required to take a short position in an option. Be it selling a put or selling a call, the margin required for this position will more or less replicate the margin required in taking a futures position of the same underlying of the same quantity.

Everything you need to know about margins is discussed here across these three chapters -

Option Writing: What happens if margin available goes negative in balance.

I use multileg strategy involving shorting options. Couple of time, I saw that due to major move in market, my available margin got in minus (negative value). So I quickly bought back options to get it in green.

I am wondering what happens if it keeps in negative for overnight positions (NRML orders).

I understand SPAN margin is something is necessary. If -ve balance value is below exposure margin, would it allowed to carry option positions overnight of till expiry provided those expires worthless?

If the margin goes in -ve, then in that case Risk Management System will square off you position automatically after some value

Is the exchange squares off or it is zerodha automated system?
Anyway, what is criteria for some value.
Like in panic, I exited some short options taking some loss.
Is there a way to know if I can wait for some %of value in loss and then exit?

Like now my -ve balance is almost 50% of exposure marign and now I must exit or system will automatically square off positions. May I know if something exist to take a decision?

for safely of our trade, whenever margin is going in -ve, we should close our trade or we add more money.
squares is done by every broker when margin is not available.

One more doubt: I have read below from varsity: (https://zerodha.com/varsity/chapter/margin-m2m/)

> "Remember between the SPAN and Exposure margin, the most sacred one is the SPAN margin. Most of the brokers allow you to continue to hold your positions as long as you have the SPAN Margin (or maintenance margin). Moment the cash balance falls below the maintenance margin, they will call you asking you to pump in more money. In the absence of which, they will force close the positions themselves. This call, that the broker makes requesting you to pump in the required margin money is also popularly called the “Margin Call”. So, if you are getting a margin call from your broker, it means your cash balance is dangerously low to continue the position. "

So question to Zerodha, do you also follow above rule? i.e. waiting till the balance falls below the span margin? Like I have now -ve balance is 40K but spam needs 40k and exposure also 40K. So my positions will get squared off automatically? Can I assume my positions would be safe if it is below -40K ?

Why short straddle needs more margin than naked PE or CE sell ? It should be less according to risk factor.

In Short Straddle you are holding two positions as opposed to one when you are Shorting naked CE or PE, also the risk associated with Short Straddle is still undefined.

If my position reaches maximum loss in call side then put side I don’t have any risk(even at expiry)and vice versa. And I am getting extra premium on other side. Pls. Explain

This is the pay-off for Short Straddle, as you can see your profit is limited to premium received but max loss is unlimited.

Also margin requirement to trade Short Straddle isn’t high, the initial margin requirement for Short Straddle is 271k but actual margin you need is 158k, so you are infact getting margin benefits of 112k.

If I am selling 22000 short straddle.il I don’t get unlimited loss on both side. If oneside I am getting unlimited loss then 100 % sure otherside I am getting maximum profit. Then my profit of otherside should reduced from original margin on loss side. Basic maths.

No. When you Short a Option your profit is limited to premium you receive as price of Option cannot go below Zero, while max loss is undefined as there is no limit to how much the price can rise.

For example, you initiate Short Straddle in 22000 CE at Rs. 100 and 22000 PE at Rs. 100.

Tomorrow market makes big up move and your 22000 CE goes from 100 to 400 (Loss of 300) while max your 22000 PE can come down to is 0 (Profit here only 100), as you can see you are in net loss of 200.

Why don’t you give this chapter on Short Straddle a read.

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Leave it.i am convinced.

overnight short margin penalty debit is charged on the span margin or exposure margin ?

You need to maintain sufficient margins (SPAN + Exposure), to ensure there isn’t shortfall and any penalty.