Zerodha : BNF options buying blocking : Explaination required

#1

Hi ,
Zerodha is blocking certain BNF option buying under the condition of OI limits at member level reached. At the same time its allowing selling of BNF options in those strikes .

Following is NSE link for OI limits at member level :
https://www.nseindia.com/products/content/derivatives/equities/position_limits.htm

Extract from above link
“The position limits of Trading members in equity index option contracts is higher of Rs.500 crores or 15% of the total open interest in the market in equity index option contracts. This limit would be applicable on open positions in all option contracts on a particular underlying index.”

where does the above link says you allow selling but stop buying ?:thinking::thinking:
Does it specify Buying contributes to OI but Selling doesn’t ?:thinking::thinking:

Has ZERODHA set internal limits of 70% of above 15% limit as specified by exchange ?
If yes than why it has not communicated same ? This internal limit is like a BIAS towards option buyers .

Can Nithin or Zerodha Team responsible person honestly reply on this ?

Option Buying Not Allowed
#2

Let me explain how OI is calculated.
OI is calculated by summing all individual level OI at each strike and each expiry for options.

For ex: consider banknifty 30000 strike, it will have call and put at that strike. So, now consider 30000 call current month.

Suppose 30000 call current month has 50k longs and 30k shorts, 50k is cumulative open count of all long positions at zerodha and 30k is cumulative open quantity of all shorts. In this case at that strike level for calls 50k is considered to calculate final OI, only one is taken in to consideration, ie either longs or shorts which ever is higher at that strike, similarly for puts. As zerodha is retail brokerage we have more buyers than sellers at any strike, hence increasing short will never be a problem for us or to other clients, that is the only reason to block buyers for certain strikes and allow sellers across strikes. Hope you got it now.

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#3

During last weekly expiry, zerodha did not allow buying contracts greater than 150 points from spot. This is not due to oi limits. I think zerodha has some policy related to strike price

Can you change the limit to 200 ? Because 150 points is about 0.5 percentage of banknifty value. 200 points from spot would be better choice.

#4

This is not fixed, it varies accordingly to the current OI level. Sometimes upto 1000 points is allowed.

#5

Hi Siva ,
Thanks for Response.
I was under impression buying/selling both contribute to OI at member level and they are to be added .

NSE rule states : “15% of the total open interest in the market in equity index option contracts”

Yes NSE never stated how OI is calculated , i.e Buying and selling both are considered separately and not combined (I hope Zerodha is right on this).

Kindly add the above explanation to zerodha support portal.

#6

What I am asking is not related to oi level.

Banknifty spot was 29747 and I could not place buy orders on 29900 CE but I could buy 29700 PE.

Similarly, when banknifty spot was 29755, I could buy 29900 CE but not 29700 PE.
Zerodha has some policy to block these orders

#7

We just set some %, this would allow to take positions based on that %. For ex: if we set as 1%, strikes above and below 1% from spot is allowed, as spot is dynamic these strikes are also dynamic, there will be sometimes when 1% will be just below or above from nearby strike.

#8

Yes, on expiry day it was around 0.5 percentage. Can you increase it a bit higher to 0.7 ?

This allows purchasing of otm options two strikes from spot

That is ATM and nearest otm. I am also missing hero or zero bets due to this limit.

#9

What is this % percentage number ?
Doesn’t zerodha set restriction on 15% OI member level threshold value ?
Is there a new different setting followed ??

#10

Is this restrictive range only for weekly options or for monthly ones too?

#11

For all.

#12

While I understand the limitation that a single broker cannot consume more than 15% OI, is it even legal that Zerodha blocks buying options while allowing to sell the same option contract? Buying options by paying full premium carries limited loss risk for client and zero risk for the broker. Blocking buy trades and allowing sell traders only mean that Zerodha wants people to churn (to earn higher brokerage) and also earn float on the margins. @nithin Please clarify on this aspect. Else we will have to go elsewhere to search for answers.

#13

I have clearly stated above on why we allow sell, also why would we block buying as we can earn more money via allowing that and buying required very limited capital unlike selling and buyers are the ones who does more trading.