Why Margin for ITM Option Buying is huge ?


Premium : 5.95
LotSize : 3000

Margin for buying this call option for 1 lot should be = 3000*5.95 = ~18k
But in #zerodha they are showing Margin requirement around 45k

For ATM/OTM they are showing valid margin as per the calculation but don’t know why margin requirement is high for ITM

Is it has any relation with new SEBI rules ?

We are in Expiry week, so during this period Long ITM Options need additional margin as per exchange requirement.

  • The Exchange charges physical delivery margins as a percentage of applicable margins (VaR + ELM + Adhoc) of the underlying stock which is levied from expiry minus 4 days for long ITM options.

You can read more here.

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What is the usual value of (Var + ELM + Adhoc) for a contract of SBIN 300 CE?

[Assuming that stock is trading just above 300 and lot size is 3000, contract value is 900000 Rs.]
The post mentions that the margin keeps increasing from Friday prior to expiry week till the expiry date [10%, 25%, 45%, 70%].

You can check the VAR, ELM and ADHOC margins on NSE website. Refer to this page for SBI stock.

SBI’s VAR + ELM + ADHOC margin is 21.6%. So for contract value of 900,000 the applicable margin will be 194,580. On expiry minus 4 days you’ll need 10% of this margin if your Long Option position becomes ITM, so on and so fourth for other days.

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