Exactly.
Suppose Nifty is at 12226 right now if i short 12100PE and 12400CE with same expiry would it be a hedged position requiring lower margin?
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If weekly is squared off during the market hours, then yeah the risk management will get alerted that margin is short for the monthly and then squared off. But when the weekly say expires on Thursday aftermarket, the monthly will remain naked overnight carrying risk but with less margin.
Similarly, if the weekly is squared off and monthly doesn’t have any liquidity, it will remain naked with higher risk until liquidity picks up.
The risk is lower than just one side, so the risk is slightly lower, so no margin benefit really.
the S&P E-mini like I mentioned earlier has 10% margin requirement (most actively traded futures contract in the world). For Nifty it is around 11 and Banknifty around 13 in India, which is almost as much as E-mini considering we are much more volatile.
We recently had a Banknifty 9% intraday move (the mini budget), so 13% on a bad or very good day is possible. Margin collection has to cover for the risk on such a day. Check this
https://www1.nseindia.com/products/content/derivatives/equities/margins.htm
The margin required for call spread and put spread are gonna come down for sure?
By what percentage to now?
Still don’t know the exact figure, but will fall drastically (>50% kinds)
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News mentions that 8 times leverage can be provided. Leveraged trading in F&O capped at eight times the initial margin - The Hindu BusinessLine
So if I write (Sell) a Banknifty option which requires around 80000/- … 8 times will be 10k per lot …
Is this correct ?
In fact astha trade is showing much lower Initial margin as shown in screenshot I took from their website just now
Can someone verify this ?
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8 times leverage for equity or stocks. F&O is already leveraged, so needs the minimum required margin for both intraday and overnight positions.
Thanks nithin… it’s amazing how you are replying to all posts
I will update you on Monday based on what other brokers are offering like astha trade and angel broking
@nithin overnight (carry forward) positions are more risky due to gap up and gap down at opening and stop losses won’t be trigerred
INTRADAY is not risky due to presence of volume and also market freeze mechanisms already in place
Please rally for us and speak to sebi
This rule of sebi will kill the market completely. People won’t trade as the returns wont be worth the effort
Only option buyers can play… but they are bound to lose in long run…
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@nithin This 9% and 13% moves will not happen in a single 1 minute candle, but it will be gradual… Broker always has a RMS policy to take care of this intraday moves…
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Yep, the risk is lesser intraday than overnight. But the SPAN calculator designed by CME used by almost all the exchanges in the world, doesn’t really do this math of what should be the margin for intraday or overnight, it just has one. There is representation being made to SEBI, let us see how it goes.
Retail traders can never win by option buying as there is component of time decay eroding your gains. Most likely markets will move sideways most of the time now with this rule so that retail traders keep losing money
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SEBI should have first lowered margin on hedged trades, Then reduce intraday leverage. But first they reduced intraday leverage. These people are always against retail traders . In intraday if you make a bull call spread with 100 rs width in banknifty, risk is only 2000 rs. So ideally they should decrease the margin ,why to increase the margin requirement. The purpose is to deprive small traders from hedging in FNO. Someone should file PIL against SEBI on behalf of small traders community .
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Hi @nithin
Why not zerodha introduce spread order book which will enter and exit multiple legs simultaneously. This will be the first step towards defining max risk right?
And without spread orders books in place how come SEBI will reduce margin requirements for hedged positions in coming few weeks? How the risk of closing one leg alone handled then?
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This is a mega project, but on our list of things to do.
The risk of closing one position can’t be covered completely, hence the margin requirement will not drop as much as it potentially could. The broker RMS team will have to track and close positions like how they do now, if margin isn’t sufficient for naked position left.
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Hai @Pari_T.A, if you see Thinkorswim software in usa , for exapmle if you are taking bull call spread , you need to close one leg , no problem you can close , if you close the margin will suddenly will increase , if you have sufficient margin you can carry forward , other wise the software will squared off , and the mesage will pop op insufficient margin for carry forward , the same way zerodha also will work , normally SEBI will follow developed market how they are working in coming days
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Actually upcoming these kind on hedged position margin system is good for market we can see liquidity in all stock and we can do calendar spread like strategy very easily , its very good and keep clean ecosystem also , i agreed
Thank GOD SEBI understand how these hedged position will work ,
The next big things is ZERODHA ,NItin sir is very close to sebi to advise the margin system to them , i am waiting for this for very long term
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Thanks for the info! Never did this before so was not sure.