Option trading account india best margins


You should get your other inputs from here: Thank you for the information. So is it possible to get a rough premium value of the option for the next day by putting in these values. I got the volatilty as I would like to know if i am doing it correct.

Pls correct me if I am wrong. Then putting these same values in option calculator I got Below values. So what i guess is the premium for the Put Option aug would be around Rs? Put Option Theoretical Price Can u help please. Is there any blog which is been posted from your side for info about that. Maybe posting one would help many to understand it on the software and also on paper. Please guide what will happen in below case If I short 2 Maruti call and at the expiry if Maruti is below How the trade will take place?

Swapnil, if you have shorted Calls and if stock price of Maruti is below , you can let your options expire, because you will get to keep the entire premium as profits. There is a problem with stock options because of liquidity, if you want to exit you might not get the best price on the exchange. What this means is that the buyer of an option can exercise only on the last day of expiry and even if he does, whatever is the difference is settled in cash.

Assume you shorted puts Rs 50 on Nifty and Nifty tanked to Assume now that the liquidity in this contract becomes zero i. First thing you need to understand is that in India all options are settled in cash.

So as a person shorting option contracts, you never have to worry about either taking delivery or giving delivery of stock if assigned. If you are assigned, you have to pay the buyer of the option difference in money from the strike to the current closing price.

Also all options in India today are european, what this means is that the buyer can exercise this option only on the last day of expiry. Dhaval, time decay is only one aspect of option writing, but value of option going down also depends on volatility. If volatility picks up, both the premiums can go up, even when there is a time decay.

But yeah, this is relatively a safe strategy, but if market moves in one direction very fast, it can still cause you a loss. Dear Nikhil, Suppose I want to place a bull call spread strategy on nifty trading at say I am buying CALL What it indicates the far the strike you sell the more profit.

The idea of shorting the OTM call is to basically be able to hedge your long call position. The problem with shorting a deep OTM option is that you are hedged only to the extent of Rs 2. What this means is that if market goes against you, starts going down , the Which strike you want to choose will depend on your strategy, if the idea is to hedge, there is no point shorting call to reduce your risk by just Rs 2. Dear Nikhil, for creating bull call spread which chart I should see the nifty spot, nifty futire or the option chart?

Dear Nithin The option premium of the August contract is very low when compared to the previous month,even first day itself of this contract. For example Nifty call is at May I know reason sir. Value of option also depends on expected volatility in the markets, this basically tells you that market expects very low volatility for the next month.

For initiating bull call spread can I buy call today and sell call after two days or it has to be done at the same time. It is not a bull call spread, unless you execute both at same time. Yes it will be two trades as you are placing orders on two different contracts. Hi Dhaval I am new inot this options trading can you let me know the strategy so that I can also try out.

Plus intraday chart comes with 20 days of intraday historical chart, whereas NEST intraday has only for that particular day. Historical chart gives daily chart for the last few years. Hi, I am new to options and zerodha trading platform. My query is if I sell a put option of Rs. So if you are short puts at say Rs 5, and reliance drops from to , the value of puts might go up from Rs 5 to Rs 7. Since you are short, this Rs 2 increase would be your notional loss. So you can either buy back the option at Rs 7 to book this loss or else hold it till expiry.

At the end of expiry, if Reliance is at or any value over , the value of puts will become 0 giving you Rs 5 x lot size as profits.

Hi , Nithin Sir. I am new to options writing and want to know regarding OTM options expiring worthless. You need not square it off at 0. But if you need that margin to be unblocked which is being used for the short options to take fresh positions, you will have to.

When you short options the risk is unlimited and hence a margin is usually blocked which is again as per exchange regulation mostly.

You can check out https: I had a doubt regarding options from past 2 years how it works actually …. I read it and gained knowledge about options … I felt very happy because I spent 1hr on this …. This month only i started trading in option i got it what is call and put but i want to know about short selling of call. Only the options which are out of money on expiry will be 0.

So if Nifty closes at , Call will close at , and call will close at 0. Yes, you can short and buy back immediately or anytime before the expiry day. If you have bought 1st week of the month for Rs 5 and if NTPC is still at at the end of the month, the premium would have already dropped below 5. I want to initiate a calendar spread strategy in Nov Assuming at that time nifty is trading at My pay off diagram is as attached.

In this you can see that maximum gain is around is 40 but the loss is around How can improve this so that I can get gain is more and loss is less. If possible can you please walk me through this strategy step by step including steps to exit the strategy. Little confused with your strategy, you are thinking of shorting Nov Calls at 57 and buying Dec calls at ?

You intend to hold this till end of December or until end of Nov? Because if it is till end of Dec, your payoff diagram is not right. Nifty could close Nov at , loose you points and then drop below in Dec to loose you the on long calls, potentially losing you points.

If you are holding till NOV expiry, there is no way to increase your risk to reward using this strategy. So Nov calls might go up, whereas Dec calls may not go up as much. This again will hurt your strategy. Hi Nithin, Thanks for your knowledge sharing…. I am new to options trading, I have few questions: Do I get buyers for this huge amount of call contracts? But if you are trading stock options, be vary of the liquidity. What if there is no buyer for a contract OTM that I want to short at market value?

Will my trade be executed or will it be in open state till any buyer is assigned? If my trade is executed immediately then who is paying the contract premium to me? Also what will happen if there is no buyer till expiry? Will my OTM position be exercised at zero price?

You can place a limit selling order and hope someone buys it from you at that price. If market is moving in your favor there is no issue, but if it goes against you the only thing you will be able to do is to take position in another contract to hedge this risk.

On the expiry day, if your option is OTM, then of course it expires at 0. The spread order tool is a highly significant tool for strategic traders like us.

We can make margin benefit through it. Moreover we can calculate our maximum risk of loss before entering. To put it in simple terms, as in Modi governance less government more governance is enhanced, likewise in Spread orders, less margin requirement more trading oppurtunities is enhanced.

I want to get some clarifications regarding it. Through your articles i do understand that spread over entries will not get displayed in general order book and we can check our entries in spread order report. Yesterday i made a spread order entry, in spread order report it showed that the transactions got executed in completed orders coloumns.

So i thought the order had took over, but when checked in back office report yesterday in open position coloumn those transactions are not there. So how do i know whether the transaction had got executed or not. In order to get it clarified Yesterday 3rd november i called zerodha customer care, it kept on ringing, nobody to answer.

I kept on trying but still its ringing nobody to answer. Please for customers convinience, pls provide us with alternative number for call and trade section.

Hope u will consider. Our IVR lines crashed yesterday, which caused this problem. Will get someone to call you back. Thank u for ur speedy response. Please provide me the information of Spread order report sir as mentioned in my previous query.

If I am writing a call option in currency what will be the margin amount will be hold by you assuming that rupee trading at Hi Nitin, I tried to place an order to buy Nifty Call options units, but it got rejected with below message? Check freeze quantity for FO including square off order,Current: Arun, exchange has put a limit on maximum order size. So for Nifty it is , if you want to buy more than that you need to do it in multiple orders.

So 10, 3 times will get you to 30, Gerald, finding opportunities in calendar spread is quite tough considering there are a lot of computers playing the arbitrage game. It is very difficult to track and know what is happening to the underlying, also there are no chart options for Nifty, bank nifty etc?

Arun, you can add the index in the index box on the top right. In our new platform Pi, we have options to look at index chart as well. Sorry man if i am posting this again.

How about selling options intraday using cover orders as an alternative to buying advantage being the rangebound markets. Normally shorting options is deemed riskier primarily bcoz of the reason that at expiry if youre on the wrong side,youll lose a lot. Is there anything else that makes shorting riskier than buying?

My idea is to use shorting using cover orders as a better alternative to buying Normal product type so that you dont need to worry about listless rangebound markets. Margin required may be higher than buying even if cover orders are used but thats the maximum we can go.

Is it a good idea? Manju, Option writing has definitely better odds of winning compared to buying options, even if it is for intraday. Typically time value keeps reducing even during intraday and hence you benefit as an option writer. The only tricky thing is, if the volatility picks up, option premiums can suddenly shoot up. I am asking this just to know what is the liquidity in Bank Nifty options if I want to trade in huge volumes….

You are doing great job by answering so many user queries. Sell OTM — Mar Exposure margin is calculated twice which is big blow to retail investor as it blocks great amount of capital.

SPAN requirement of each leg is added while doing margin calculation. This is another step where significant capital is blocked.

NIFTY is cash settled and European index so why margin is blocked for each side of short leg when only one condition can be true at expiry. There is no exercise before expiry so no risk of early assignment. I read your comments above regarding concern that trader may square of 1 leg of position leaving other short position open. Hence you calculate margin for sell side. However SPAN software which I believe runs multiple times on a day on entire portfolio should be able to catch such situation almost realtime or at end of day.

My point is that for spread and strange, investors are not getting real benefit of SPAN by reducing margin requirement based on risk level. Kunal, firstly what brokers block is basically what exchanges asks us to block. So yeah, as a trader for so many years, I have always wondered the conservative approach exchanges take in this regard.

I guess you have checked our SPAN calculator , the values that this return for various strategies are as per the exchange. You can blame them for this, but on the flip side because of their conservative approach we have never had a default on NSE, even when we had probably the most horrid times in Are these regulations same for Institutional investors as well? May be simple statistic of Retail vs Institutional Open Interest can point it out.

Retail investor will stay away from options industry as one needs big pockets. I mean you are in better position to comment on statistics.

The margin requirements are same for everyone, it is set by the exchange. Yes, and u can hold till 3. No, only in multiples of 25 3. The way you bought, same way place a sell order for the quantity and price. Yes, Nifty options are the most liquid instruments in the market. Or am I missing something here? Can we simply sell puts and pocket Rs — its OI seems to suggest it can take that volume. Is the calculation correct?

Am I supposed to deposit over a crore into Zerodha account to get 90, premium? Guess you got the answer to your previous question: The buyers are people who are either covering their shorts if OI is decreasing or if OI is increasing would mean people trying to hit a lottery. Now my que is whether the margin blocked will remain same till Nifty crosses or will it increase as Nifty approaches and I have to provide additional margin to hold the position.

Umesh, the margin will keep going up as and when Nifty goes towards Yes, you will need to bring in additional margin then. I am new to Zerodha and just came across this article. My observations on these 2 trading platforms. Will appreciate if you can clarify:.

The moment you short an option in ICICI Direct, a trigger price is decided and additional margin is required only when this trigger price is breached. But in Zerodha due to MToM applied on the written options, every day additional margin is blocked for those options.

We have built a SPAN calculator that shows the margin requirements even before getting into a trade. Btw this margin requirement is as per the exchange. There is nothing like a trigger price is decided in advance. At the end of every day, if the market moves against you the margin requirement for that option automatically goes up, and similarly if market moves in your favor, the margin requirement drops.

Hi Nithin, Thanks for the response. Let me take an example for a better understanding. This is for my better understanding of the way Zerodha works. Extra margin is required only when Nifty moves to or below that. Since the written communication always has its limitations, Is there a number where can I reach you.

A Put requires in margin and a PE requires , when Nifty is around So the margin requirement goes up by only Rs for a put that is points more in the money.

If yes ,how do go ahead with option writing? Option writing like option buying needs only a trading account. Whatever is required for option writing is put up in the blogpost above. We will soon start module on options on: But do read the blogpost above, has explained most of what you need to know. The margin required by SPAN calculator is the minimum margin that should always b kept in my account while writing option…? You will call after the margin is swept away to deposit additional amount for continuing..

Dipesh, SPAN is the minimum that you need to have in your trading account to carry forward the position overnight. If the SPAN is not there, exchange puts a penalty. You get to keep the entire premium that you had received after shorting. For an ITM, all options are exercised, and how much ever the option expires ITM is transferred back to the buyer of the option. Hi Greetings, i have few doubts in options and shares please clarify, 1. If you have that is enough to buy and hold till expiry.

No extra margin required for buying. And one more thing…. Milan, if on expiry day Nifty is below , you will loose the entire Rs that you had paid to buy this option. Options are very risky and it best to take it easy especially when starting off. We are starting on the Options module on Varsity soon, check this out: So My Total Qty is: If you write calls, whatever premium you shorted will be you profit if Nifty closes below So in the above case entire Rs will be profit if Nifty closes below I have never seen a CEO supportive like you.

Keep introducing news things and ideas ….. Check this post , has a little on how I used to trade. If you are starting off, the most important aspect of trading is risk management. The safest way to trade is being non leveraged, that is basically buying stocks in delivery and then selling. Do check this entire section , quite interesting. I have read the American Options can be exercised at any time and European Options can be exercised on the expiry date of the contract.

Suppose if i am holding a position a Call Option on Bank Nifty, tomorrow my premium is increased from the buying premium — the profit earned will be credited to my account tomorrow or it will get credited while i close the position? Ganesh, we have just started the option module on Varsity, check this out: In India all options now are European. Exercising is basically when the buyer of the option exercises his right.

Since in India all options are cash settled, exercising would basically mean that you get back the intrinsic value of the option. So if you have Reliance calls and reliance stock closes at If you exercise, you get back Rs I am new in option writing but great fan of zerodha, the way you are responding queries here, my query is: If yes then how much profitable amount would be credited into my account calculation please.

Firstly you can get out of your option trade anytime you want. There is no rule that option shorts have to be kept till expiry. But assuming it is at 0. When you short options, the premium is credited to you the next day itself.

On expiry, if you do nothing and stock remains below the strike, you get to keep the entire money you received when you shorted the option. What if stock goes ? We have just started options module on Varsity, check it out: Hi nithin, I have learnt so many things as new trader from z-connect. My query is if i short sell nifty call at 39 and later i buy it at 10 rs. One more query …. If nifty current is and i write option April call of nifty … Premium is 10 rs.

Next day nifty goes down say Then premium price down to 8…… At a time can i book profit and square off this contract? Can i exit at this time? Or my contract will be open till the april expiry …..

If i can exit then how much profit i will get in one day?.. If you sell and buy, you are out of the trade, so you will not have anything to hold overnight. Yes, you can exit it the next minute if you want to.

And it clear my so many dounts. Thanks for developing tool like this. But one thing is not clear to me yet. Suppose bajaj auto currently trading at and i bought call option strike price with premium 6. So assuming that …. Case 1 traded price on expiry is Than no profit no loss. Case 2 last traded price is So intrisic value as — — 6. To decrease loss from 6. Hi Nithin, i have observed that….

AM i Correct in case 1??? AM i Correct in case 2??? You need to have this margin 32k while getting into the position. Once you take the position, the premium gets credited to you, effectively blocking only around 25k.

You can check all margin for futures here: Closing Price 30th March: We have started an options module on Varsity, check this out: We will start pricing soon there. Hi Nithin, If I want to initiate a long butterfly strategy will it be 4 trades one by one I have to initiate or can I do it at the one time? Yes Anantha, as a retail trader, you have to use 4 different trades.

You can use Basket orders. Nithin Sir, one small query if I go for Call sell position , I know my margin amount will be blocked but will it be debited by broker on next day or not?

Please Note I am not talking about premium. Naveen, the margin will be blocked immediately, as soon as you take the trade. Like in futures, margin is not debited, it is just blocked in your account when you write options.

If you exit your position, the margin gets unblocked. So my question is.. Yes Prasad the odds of making money writing OTM options closer to expiry is quite high. But here is the thing though, the margin required to write 2 lots and get that Rs , you need to block a margin of around 40k around 20k per lot. So the return on investment is around 0. Nothing guaranteed in the markets Karthik.

What if something crazy happened and market suddenly bounced upto ? Your short calls will now make a loss of Rs Margin blocked gets released as soon as you exit your positions. Once you have pledged after haircut, you will be given margin to trade futures or short options in your account. It is always best to keep some cash for any MTM losses.

If the losses exceed the cash you have, it will start getting debited from the margin provided for your pledged shares. All options in India are European, so they can be exercised only on the expiry day. I have called Zerodha Support twice today and asked them a query on how to excercise the options to stock?

The main objective of call option is the obligation to buy the specified lot at a specific strike price on the expiry date na?! But they were saying that I cannot excercise convert that to equity stock options. Karthic, in India all options are cash settled.

There is no actual delivery of the underlying that happens. Suggest you to look at the options module here: A stock is at Rs , you short calls at say Rs 2. On the expiry day the stock is trading at say You get to keep the entire Rs 2 that you had received by writing the option. If stock on expiry day is at , you have to give back Rs 2. Do read up the module.

First of all, I have no words to appreciate your initiatives in the form of Varsity, PI, Nest, Span Calculators, Blogs, low brokerage, sustained credibility and many more. Do you suggest options are less riskier than future trading?

Do you suggest options writing is better than option buying? So my query is: Nifty Spot — ; I believe that it will not go beyond ; so I shorted Call of strike price at for e.

Now, if I see that nifty is trending upwards, so can I buy that call back if nifty strikes to limit my loss and close the position at the breakeven? If this works then why we say there are unlimited losses in option shorting when people can watch and close their trades at the breakeven all the time? But yes, if you trade correctly definitely less riskier than futures. Option writing has higher odds of winning than option buying as explained in the post above. If you shorted call when Nifty was at at Rs 2.

If Nifty goes upto , the premium on call would have definitely gone up. Assume it went to Rs , if you now buy back, you will book a loss of Rs Your understanding is wrong, writing has unlimited loss. As soon as you shorted calls at Rs 2. You mean if call has been shorted 2. Then if I buy back it will be 5. I have seen in a lot of the posts where you mention that writing one option contract would require about 20k in margin.

Could you please clarify as to which figure is more accurate? I think there are many answers here from when lot size of Nifty was 50, which is now Hi Nithin, I have a query on options buying and selling.

I am asking this because as a seller of an option, I have an obligation to sell the underlying security to the buyer if he chooses so. Does that mean that I may have to arrange for it at a later date? In that case, who sells the security to the buyer of the CE? Shailesh, once you have taken a trade and then exited it, you have no obligation whatsoever after that. Do check out http: Nithin…I will check out the link..

Odds are in favor of option writers only if they wait till expiry. Otherwise odds for option buying and selling will be defined by the strategy one uses.

Also in writing options unlike buying one needs to keep a margin amount. So writing options not that attractive and also too risky because losses are unlimited unless its capped my more complex strategies unless one is doing so close to the expiry and that too OTM options.

So am more or less an option buyer except when am trading near expiry day. I bought options using NRML as product type in overnight example: As per contract note Gross rate per unit is I bought 1 lot. Why M2M is negative when premium rate is increasing? You can use our calculator: For futures it depends based on stoploss, for options it is fixed. But u can use that calculator to get an idea of margin required. Thanks for all the initiatives from Zerodha.

I have a question regarding Zerodha option brokerage. If I buy 1 lot of Nifty options at I expect to be charged 0. However flat Rs20 is charged as brokerage. Could you please clarify. Shan, it is 0. So if you buy nifty calls at Rs 20, the contract value is Rs 8. I got the doubt only because turnover tax is calculated on the premium and not on the contract value. It is highly unlikely that Nifty will reach by end of expiry in August; hence this option will expire worthless.

Therefore I would gain 6. Is this understanding correct? Since it is a highly unlikely scenario of Nifty hitting in this expiry, it is a relatively much less riskier trade to take. I short 1 lot of Nifty Call at The combined premium is Direct link to Fill up online application for 5Paisa Account. Angel broking is one of the oldest brokerage company in India having established network branches in over cities.

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