Why Zerodha is asking to add more cash (more margin) even if the Short Options positions are in profit?

[AtD]

Suppose you initiate a trade by Shorting Stock Options with the sufficient cash in the account.
If the trade goes against you (LTP is more than Buy price within expity date), Zerodha is not asking to add any cash into the account.
But if you are in the profit (LTP is less less the Buy price within expiry date), Zerodha asks for more margin.

This is my observation from last 5-6 short trades. If I am not wrong then it should be opposite than the current behavior.

Please let me know.
Thanks

[siva-reddy]

@AtD

Suppose you initiate a trade by Shorting Stock Options with the sufficient cash in the account.
If the trade goes against you (LTP is more than Buy price within expity date), Zerodha is not asking to add any cash into the account.
But if you are in the profit (LTP is less less the Buy price within expiry date), Zerodha asks for more margin.

This is my observation from last 5-6 short trades. If I am not wrong then it should be opposite than the current behavior.

Margins are not based on just LTP, volatility will play significant role in margins,anyhow we charge according to exchange stipulated margins, if you can let me know next time on specific case, I can give you exact reason for increase or if you can give me exact margins blocked in previous cases I should able to look in to that.
Also if that stock is marked for physical delivery, even though premium is decreasing, higher margins will be blocked starting 4 days prior to expiry, check this to know about margins for physical delivery.

[AtD]

Thanks.

I have not captured images of previous trades. I will check the reports and let you know if found. If I observe such behaviour in future then I wll post it here.
Also can you please share how margin gets calculated and how what range of IV (e.g. above 60) push the margin up?

[siva-reddy]

@AtD

Before these screenshots, the LTP of both the options was 0.50 and and the Free Cash was 79,233. But now LTP is 0.45 and Free Cash is gone down to 78,900 without much change in volatility.

Can you message me your client ID.

[siva-reddy]

@AtD

Before these screenshots, the LTP of both the options was 0.50 and and the Free Cash was 79,233. But now LTP is 0.45 and Free Cash is gone down to 78,900 without much change in volatility.

Also the change is few hundreds only, that is due to change in LTP as exposure will be changed based on LTP. As a thumb rule it will increase by mark to market profit.

[AtD]

Now you can see the change in few hundreds because LTP is already less compare to when the trade is initiated. But earlier, start of this month I have to cut the trade twice in-between due to Margin Call and this is because of this weird behaviour.

So please look into this and share the reason as it is a big problem when you have less/only marginal money into the account.

[AtD]

@nithin can you please help here?

[siva-reddy]

@AtD

Now you can see the change in few hundreds because LTP is already less compare to when the trade is initiated. But earlier, start of this month I have to cut the trade twice in-between due to Margin Call and this is because of this weird behaviour.

This is not weird behavior, that is how exposure margin works for options, also if you consider your cash balance, premium received via shorting is added to that ideally which doesn’t belong to you, said that in sometime I will give you exact rational behind that change.

[AtD]

Thanks for the reply.

I am not expecting that available cash should increase with decrease in LTP.
My only question is that, why is the margin calculation not considers the trade type (here it is Short) before reducing the available cash and before giving the Margin Call?

2nd question is, why should I add the cash into the account if all the trades are positive and without much variation in volatility?

@siva-reddy

I will give you exact rational behind that change

Please share.

Thanks.