Why do I require so much more money to short options as compared to buying options?

Zerodha Zerodha trivia
81

Agreed. As the sellers of the options are under obligation to fulfill the terms of the contract if the buyer chooses to exercise his rights.
So, the losses of the buyer is limited to the price of premium paid while profits are unlimited, where as for the seller the profit is limited to the premium received while losses are unlimited. thatswhy only premium amount is required to be paid when you are buying options while margin amount similar to what is trade in futures is required when you are shorting an options contract.

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Why more margin is required to shorting / writing options than buying options?


Happy Trading
Cheers

82

The reason for margin being high in shorting is since the upper level of the price can go up to any extend.

If you are writing/shorting an option your profit is limited whereas your loss is unlimited, so that’s the reason the margin for writing/shorting an option is more compare to buying an option.

83

Yes at the end of expiry it gets automatically squared off if you haven’t exited yourself

84

thank u for good explanation but ,i have one doubt will be there in option ,how much margin in required for call option buy

85

Hi Gopinadhvarmah,

For buying options margins required is just premium*quantities.

86

Suppose For Eg:

I Buy BANKNIFTY 36000 CE @ 200 & Square Off @ 300 the same Day. I sold it at 300.

Now the price is 100

Can I enter the Same Call BANKNIFTY 36000 CE @ 100 & Square Off @ 200.

Both the trades the same Day…

Is it possible to enter the same Call Option twice?

87

You can trade same contract multiple times in a day. No issues.

88

The buying AVG of both trades will be Different rite?

89

If you are multiple trades in the same scrip in a day, the average price will be calculated considering the total quantity traded that day. Explained here.