Most retail traders usually buy options, i. Selling options is used when exiting options that were already bought. What this means is that by buying an option calls or puts the odds of losing are significantly more. Now the question is if options buyers are inherently taking a higher risk, who is on the other side of the trade with better odds of winning? Let me explain with a basic introduction to what comprises option premium, different types of options, open interest and an example showing how most options expire worthless.

Option premium, the value of calls or puts that you see on your trading screen has two components, Intrinsic value, and time value. Intrinsic value is how much the option is in the money, or simply how much you would get if the options were to expire right now. Time value is the portion of premium which is over and above the intrinsic value of an option, i. The total number of open contracts for any option is called its Open Interest.

In the example above if Nifty were to expire today at , the total options that would expire worthless would be: Yes, an option buyer can take quick intraday trades for a profit, or be on the right side of the market and have the potential of making unlimited profits, but the odds of winning are always in favor of an option writer who benefits with majority of options expiring worthless. An option buyer has limited risk and unlimited profit potential, so if 1 lot of Nifty call was bought at Rs , the maximum loss on this trade is the Rs Rs x 50 , and if Nifty went to the call would make a profit of Rs 45, When you write an option, say 1 lot of calls at Rs , Rs Rs x 50 which is the premium paid by the buyer is credited to your trading account and this Rs on the premium is your maximum profit potential.

After taking this trade if. Since the potential losses are unlimited, it is best as a beginner option writer to be conservative, and allocate only a small portion of your trading capital when starting off. Since the risk is unlimited for an option writer, the exchange blocks margin and similar to futures is marked to market at the end of every day. So to buy an option at Rs , you need to have only Rs Rs x 50 , but to write an option you will need around Rs 25, which is marked to market daily, which means that if there is a loss you are asked to bring in those funds to your trading account by end of the day.

Option writing margin requirement varies for every contract, and as on today Zerodha is the only brokerage in India to offer a web based SPAN tool that lets you calculate this. You have a bearish view of the market and Nifty is presently at Check the SPAN calculator for the margin required as shown below:. Love playing poker, basketball, and guitar.

Around Rs required to short option. You can check it out yourself here: If i am exiting the call written mid way , is the process in Zerodha same as in case of buying a option.. I mean just by a single click on exit option i can the call option written. How we calculate vix for a stock like Infosys, Last time 11 October Result Day I observed that Option prices increased from 6 October to 10 October, this time prices decreased from 6 Jan o 10 Jan. Calculation of Vix for a stock is pretty complex, let me see if I can find tool for you, nothing in the back of mind.

Dr Sir I a little confused on This point Nifty is on expiry, value of calls on expiry is 0, and you get to keep the entire Rs Nifty is on expiry, value of calls is still 0, and you get to keep the entire Rs Did You mean no profit no loss? I totally agree with you. Very important and required information for all of us. I understand that margin is required when one writes the naked option and has to arrange MTM funds. A question in my mind for a long time is, when one takes a debit spread, say long call and short call, the maximum the person looses is the difference in premium which was already paid.

In such a case why should a margin be collected, though the margin is less than naked option writing? Is it not sufficient to block selling the long option alone before covering the short option? The margins blocked are as per the exchange requirements, and yes the Indian exchanges are extra stringent about this. Coming to your example, Long call and Short call, and assume only Rs 10, is blocked for this the buy premium. Yes the scenario is unlikely, but possible.

When to write Nifty options, Margin required to short sell Nifty Option

I guess the only way such spreads will become popular is if NSE starts letting people trade the spreads directly itself, similar to calendar spreads. Check the 1st image on this blog , where you can see an OCTNOVFUT spread trading at I want to write call and put nifty options Positionally. In this case we can get profit from premium melting. Other wise the lose also will be minimum and limited. Can you give exposure? For above trading method, what is the margin for 4 lots qty?

Ranganathan, you can check all margin requirements on our SPAN calculator: Krishna, it depends on what spread you are taking, check this blog on SPAN calculator , which shows how you can see the margin requirements of such spread using our SPAN calculator. Just tried out your suggestion, but the math does not add up. Suppose I get into a bear call spread on Nifty, as follows:. SPAN margin — Rs: The total margin required is still Rs. The maximum loss on this spread is only Rs. The risk is limited, and so should the margin.

The difference between the return on capital is almost 5x. Why is the margin benefit so little? Is it possible to enable SPAN minimum requirements on individual trading accounts? Guc, what you need to realize is that the risk for such contract is never limited, there is always a big execution risk which is open and one of the reasons why margins are higher. What if while exiting you got out of your buy CE position and market suddenly bounced up in this little time?

The risk on your short CE would then be unlimited. Unless the spread itself starts trading on the market similar to calendar spreads , it will never be possible to block margins based on what you have suggested. Also, this is an exchange regulation and the SPAN calculator gives what exchange asks us to block. DC, advisory is tricky because: People will never follow advise properly, but the adviser is liable for it.. If it starts working, traders will become puppets to the adviser.

What is missing is the liquidity, basically we need a lot more traders coming to the market, when they do, new products will automatically come about. The bigger problem for everyone to solve is bringing in liquidity to the markets.

I wish you include two parts like buying and writing in brokerage calculator. Which helps writers to include STT. STT changes for option buy positions, if it is in the money and you let it expire. You can read this blog for that.. Hi, If I am buying call or put options STT is implicated only on expiry but in case of writing call or put option STT is paid while writing it self.

If you look at the default example on http: If it is possible to set a trigger in the trading terminal for executing option strategy, it makes life easier. I mean when nifty futures trades at a set price, then the option strategy gets executed at market prices. Something like SL-M order. Setting trigger like what you said, take an option strategy if Nifty trades at a price, it is little tricky, mainly because of the regulations.

Exchange would consider that as an algo, which is not allowed for retail. Nitin, On the last line algo for retail , there were a couple of SEBI circulars which wanted brokers to demonstrate appropriate risk management processes before offering algo access to their customers. Is there some SEBI circular that prohibits retail from using algos? Is there also a SEBI circular under which exchanges derive power to validate algos?

What SEBI has recently mandated is that for brokers providing algo, to compulsorily take part in mock trading sessions and a stricter audit. Let me try getting you the circular numbers on these. Hi This is very wonderful article. Really I appreciate you. Recently I have opened trading account with OpetionsXpress. It is really wonderful system for trading in Options and Futures.

I recommend to you to visit that site and create a Virtual trading account and evaluate the platform which they are providing to their clients.

Still we are far behind in technologies. Sir, I appreciate you. It is a very good article. I have an account with Zerodha. I have little knowledge in option trading. What type of books is helpful for understanding the option specially option writing. I guess if you are starting off it is best to start off buying options, and move to option writing once you are proficient.

There are a bunch of books on option theory, but you would probably not understand until you have traded a bit. Try reading the derivative modules provided by NSE, Click this link: Margin is marked to market daily, which means that if there is a loss you are asked to bring in those funds to your trading account by end of the day.

I have query here. If i do short it for positional. Practically i am in loss. Theoritically i will be in loss if nifty goes above So for daily MTM, i will have to provide if and only if nifty goes above ? For overnight, when the premium goes up from Rs7 to Rs13, the margin required will also go up by Rs 6 or Rs MTM calculation is not based on the strike price, but on option premium.

Nitin,I have following queries. Suppose I have whole amount Rs. I short the option when the premium is say Say next day the premium goes to That means loss of Rs. My question is should I pay ? I want to hold this contract till expiry. Are there any phone lines available on which if I contact my questions will be answered?

When the premium goes up by Rs , margin required to short the option also goes up simultaneously and yes you should ideally transfer the loss to your trading account. Click here to access the SPAN caculator. If the loss keeps going up, and funds are not available, our RMS team will square off the position…. Query on the same line, till what loss your team will NOT square off position? I understand theoratically loss in option writing is unlimited but due to auto sq off in practical scenerio it will not be unlimited.

What that threshold value will be? How can i find that after this much loss my option will be auto sq off. This rule again is depending on the market volatility. Hi For option writing marked to market is not applicable only i need to maintain the span and exposure, is it correct.. Assuming you short an option at Rs , if this goes to Rs , you are technically sitting on a loss of Rs 50 Rs What happens is that the margin required to write this option goes up by the same amount, so yes when you make a loss the margin goes up and you are required to bring in more margin for that.

Hi Nitin, I have some questions on policy document section for — Collateral Margins Collateral against Stock:. If i hold Rs of Union Bank stock and i collateral it. Yes you are eligible for dividends. Yes Dividend is credited to your bank account mapped with us. Yes, it is both ways, one round trip to pledge and unpledge. So as per the example you have given, for the Rs margin, you need to bring in around Rs in cash, and the rest is used from the collateral margin of Rs70, Sir i wanted to know upto how much of historic price data could be back tested for the optimisation of a trading system , also the authenticity of the data available for back testing.

Anurag, how much to backtest? The more the better I guess, but atleast for 2 to 3 years historical. As long as you are getting data from authorized vendors, data should be authentic. We are working towards a new trading platform, which should give you quite a bit of authentic historical data.. Sir , what i mean is on the Algo Z how much of the data could be back tested and please can you tell me about some reliable data providers of India especially in the forex and commodities segment.

Anurag on algoZ you get only 22 days of intraday data to backtest on, but you can backtest daily candles upto 5 years. If you can wait for a couple of months, our new trading platform should give you a lot of intraday data to backtest on.

Request you to kindly clarify. In the downloads section, there are eligible securities for margin. In that list, mutual funds also are there, how to provide mutual funds as collateral margin? As far as I know, NSE allows all kinds of fixed income securities like G-Secs, Bonds, Bank FDs etc.

Any chance Zerodha can provide Bonds online in your trading platform? Could you please write a Blog on that. You should firstly have the mutual funds in your demat account, if it is not already there. Yes Bonds are already available on the trading platform, you can search for the one you are looking for. Presently we are not accepting bonds, you could say mainly because no one has come to us asking to pledge bonds, the retail interest is really low.

But, if you ask us to pledge after purchasing bonds, we will definitely find a way to work this out for you. Hello, has Zerodha stopped accepting MF as collaterl recently? Yes margin blocked reduces if premium moves in your favor, and increases if it moves against you. Yes you can trade all options with us. Our SPAN calculator lets you calculate option writing margins,. DC, If time is of the essence you can use basket orders to enter and exit.

But if speed is not an issue, then it should be ok.

Writing of options involves margin requirements | Business Line

The software is actually the fastest way to trade, provided you have good internet speed atleast kbps and a decent system. You can try here for the calculation…. Its best to use a calculator, coz applying the Black Scholes model is really time consuming, also there is not direct way of calculating Implied Volatility i.

In addition, let me make some comments about the vega effect on the premium of options, essentially it has crucial role on the premieum of an option. Keep watch and make sure this piece of information is important. The one drawback or missing thing in zerodha is option Greek values are missing. It would have been great if the call option and put options show the value of delta, vega , theta etc. This will be really helpful for the users to know the internals of the market.

Puneet, ON currency all contracts are number of contracts. So if you see 2 , it actually means 2 lots of USD each. Also, it cannot be 2 USD, because minimum lot size is USD. Though ideally all options settle to the spot price, but typically spot closes as per the futures price.

So the best way is to track the futures price. Absolutely, you can short at Rs and buy it back in 10 seconds at Rs 99 to make a profit. Similar to futures or buying options, you are not required to stay in the trade till expiry, you can short and exit any time.

So in that case can we gain by option shorting. Just make sure that you have stop losses in place, because the biggest risk of option selling is that losses are unlimited.

RVKR, it is best to trade index options as they have ample liquidity. But yeah, if you are trading an option contract and you have no offers available to buy back your option, you will have to place a limit order and hope someone does.

Any idea why we do not have expiry for month of May ? I see Jun expiry immediately after Apr in the leaps. Is it coz of elections, but still we should have expiry in the month of May Can you check and let me know tomorrow. Okay, its visible now, I was surprised because I was not able to see it on NSE website as well. Its back on in NSE website as well. When you pledge a MF, ETF, or Stock, it is pledged with NSE, and as long as it is pledged you will not be able to sell it.

To sell it, you will have to first put a request to unpledge and only then will you be allowed to sell. When you want to exit, you will have to first unpledge and sell it on the terminal. You mentioned in your reply that this is pledged with NSE, how long does it take to pledge and get the margin. And in case I want to unpledge, I close the required positions to free up the portion I want to unpledge and eventually sell and get it converted into cash, how long it takes to unpledge and sell it in the market and convert it into cash.

If it is at the price it gets executed I feel it entirely depends on the volume of a particular MF on that particular day and there might be huge slippage in terms of spreads itself and affects the yield? If you are investing into ETF, the best way is to do it on the exchange itself, you can buy and sell at the price you wish, so yes you can trade it at CMP. This is from the list on this link https: How liquid would that be, how would I enter into this on terminal and would there be slippage.

You will have to buy it through someone and deliver it to the demat, and similarly if you want to sell you will have to sell it through a third party and deliver from the demat that you have opened with us.

Give it a few more days, we will be putting up a process for this, till now people have transferred in, no one has withdrawn. Greetings of the day. Now, I was thinking to transfer all my funds worth Rs. So, how safe is my money with Zerodha?

Looking forward to hearing from you soon. As I am writing this to you, am waiting to attend the award ceremony as a winner of the Entrepreneur of the year by CII, the reason I am telling you is because the due diligence for this award was done by Grand Thornton. The question usually asked is because we charge so less, but the question to be asked is why everyone else is charging so much more in an environment where everything is online.

If I want to structure a long condor with RIL. Is it necessary to keep the difference between the strike prices same? Is it possible to structure a long condor with these strike prices all call options? Which strike prices you use is your prerogative, It is completely upto you if you want the difference to be the same or different. So the last question that is in my mind is that what if my broker defaults anyday? We are in the process of getting the various regulator approvals, hopefully before the end of next month we should be able to offer this platform to our clients.

Can I get hands on the beta? Nithin, any plan in increasing exposure in option writing for intraday only? What makes the matter worse is that other than Nifty and Bank nifty, most other options are illiquid. Something relaxation should be think over.

Excessive leverage is usually dangerous for everyone in the business, we will definitely not be taking that route to get new business. Firstly to pledge your MF it has to be in a demat form, so if it is not demated you can do it through us ILFS. If you want to sell this now, you will have to first put an unpledge request with us, and once done, you need to send a redemption request to your mutual fund house similar to how you are presently doing.

This blog is very informative and useful. I have one question here. Let s say today at the close CE is If I short it at , and nifty expires at Inc case option expires out of money your first example , the option expires at 0, so you get to keep the entire premium, and since it expires worthless there is no brokerage or other costs to this trade. If it expires in the money, call will expire at Rs Rs 20, of premium , this much money would be debited from you and given to the buyer of the option.

STT component plays a part when your buy options expire in the money, check this blog. Alternatively, you can trade using Z5 on any device as long as it has a modern browser. Hi i want to know that, is their any limits for placing order in options i. NSE has put a limit of lots of Nifty in order, so you can buy 10, Nifty options, there is no condition on value of this premium as such.

If you want to take bigger positions, you can place multiple orders of lots of Nifty. How will the MTM work for my position? I would make a gain on my long position, but would be making a loss on my short position.

Do you net the two positions together? Or would I have to add the entire amount of the loss into my account to continue to hold my short position? If you use our SPAN calculator , you will see that the margin required to get into a position like this is around 20k. When Nifty drops by points, the margin will most likely go upto around 30k, so you would be required to bring in the extra 10k as margin to hold this combined position.

Basically you will have to bring in whatever is the increase in margin for holding both positions together. Also, our RMS team typically understands such positions, so as long as the risk is hedged like in your position, you can take it easy. I try to write March CE at rs 50 Quantity..

I hold margin only 2 lac, it takes nearly 2 for writing, what will happen when my stock price increase to 75, whether my position will be square off or my span margin will decreased to maintain MTM….

Vinodh, when you write options, a considerable amount of margin is blocked which takes care of such a risk. In the event that the position goes against you, additional margin gets blocked at the end of the day. If it goes in favor of you, lesser margin is blocked at the end of the day. If the situation is going against me, my positions will be squared off. But if situation returns favourable for me, say after a few trading sessions, will I get my positions back??

No Vinod, Once your position is squared off, that means you will not hold the position anymore. So it is always best to trade with enough margin cushion for any MTM losses,. Hi Nithin, I Want to prepare with proper funding for the Election strategy. I have quick 5 question on this example. Q1 Will My profitable Put position compensate my MTM loss in my futures position?

Q2 The only thing that will shoot up will be the margin required to hold my futures? Q3 How much time is given to top up my account with the margin required before any penalty? Q4 How much time is given before the position gets squared off due to margin call? Q5 Generally in such senarios by how much percentage increase in margin takes place?

Technically the futures position MTM loss cannot be adjusted by profits from the Put position. But as a RMS team we understand that it is a risk free position and will give you time to bring in MTM losses on your future position.

We will have to report margins to the exchanges at the end of everyday, if there is any short margin in the account at the close of markets 3. So if 30k is the total margin for Union Bank, only if the margin drops below 24k will the exchange penalty happen. We would typically not square off such a position, and will give you time as long as the value of Put has increased and making up for MTM losses. But note that there might be a exchange penalty for such a position.

My last question was. But again, this is not exact figure, it can be higher or lower. Nithin, seems like its quite complicated to convert offline MF into demat and vice versa I did call up Siva and even for him it was new. I have few questions related to Liquidbees The return on Liquidbees is really pathetic compared to other liquid funds, but anyhow , it would be great if you can clarify the same.

Its the same as for any stock? Also I read somewhere to promote this product the brokerage on this product is waived off completely with lot of brokers, is Zerodha one of them? What are the demat charges? This is what I went through on GS website and some more links around. We presently charge brokerage, and the DP charges would be Rs Hi, I have question on MTM. But as an RMS team, we are usually considerate with such hedged positions, and give extra time for you to bring in the MTM losses.

But if the margin reduces by the minimum required SPAN as per the exchange on your short option, there would be an exchange penalty levied.

Can a broker provide additional margin by taking collateral of the Long Option which has gained in value to offset the margin required by the Short Option position. It is pretty high, and it is just not about the quantum of penalty, this is considered being uncompliant. Yes you can pledge your stocks, and get a margin after haircut. You just need to maintain some cash for any MTM obligations. So there is no cost for the collateral margin that will be provided on your stocks.

Presently we have stopped accepting Tax free bonds, the reason is because it is tricky liquidating such bonds with the lock in conditions. Well, was going through some posts on tradingqna and came across this: I am interested in writing options on nifty. Pls advise how I can get started with Zerodha. I need to clarify a few things before I can begin — is there someone I can contact in this regard?

It is quite simple actually, and every client of ours is already enabled to short options. You can ask all your doubts here, will be happy to answer. You recommend shorting OTM options but the returns seem to be lesser than bank FD interest because of margin requirements.

Do you recommend any specific strategy how far the strike price, how far the expiry, etc for shorting Nifty OTM options that can consistently beat bank FD returns benchmark factoring the margin required?

I will not be able to comment on any strategy as such, the post is an idea to initiate a trader to option writing. Fiddled around with numbers in https: NIFTY JUN Option Type: My guess is you were looking at April contract, and hence the premium receivable showing , for me it is showing Rs nifty put is around Kris, the stats would be based completely on the strategy you deploy, option writing generally the OTM will give you higher odds of winning.

Please answer to my below few questions — 1 Is INDIAN people allowed to trade in FOREX market? Is it possible to trade in Indian Currency market after 6 pm? Thank you very much for in detail answers. Need answers of below. NSE has more volumes 2. It is also available on Zerodha Trader.

Live charts with technical analysis is available on Zerodha Trader. How this stock settlement works? Square off is when you exit the option position that you are already holding. All options in India are cash settled and European which means you can exercise them only on the expiry day. This option is considered exercised and after 3. In the indian context there is no assignment anymore in the pure terms. But generally what assignment means is that if you have bought call options and I have shorted call options, if you decide to exercise the call option right to buy , I might get assigned and have to deliver the stock to you.

But as I said, in India all options are cash settled and there is no concept of assignment. Cash settlement is when you exercise or at end of expiry you get back cash, if you get stock it is called stock settlement. Thank you for your reply and clarifying my doubts. There is no chance of stock settlement, but a buyer want an stock settlement then what is my maximum loss? Yes, on expiry if reliance closes at , you will have to give back Rs , but note that when you have shorted there would be a certain premium credited to you.

Nithin, Icici direct offers an option plus product where the margin requirement for writing options is very less. Why not zerodha introduce that kind of a product?

I have couple of questions. How do i enable bracket trading in Zerodha? Does Zeordha Provides any BTST or STBT to trade stocks? Check this blog on how to enable. Could you please elaborate this comment. Because I am newbee to the option writing. How to check indiavix percentage— by intraday basis or contract basis? Little confused myself on what Joju was trying to say, but if you are an option writer the best times to write options is if IndiaVIX is on the lower end of the range, check this post on IndiaVIX.

The range of VIX historically has been between 12 to around If you are writing options when VIX is trending up or on a higher end of the range, technically there is more volatility expected and hence not the best time to write. If i short tata motors call option at a premium amount of 16,one lot while it was Another lot of call option at a premium of Now currently it closed around Last traded price is Whether v have to calculate loss with option last traded price or with tata motors cmp?

Your current loss is based on the current price of the option which is Rs 35, after expiry last thursday of the month , you can calculate loss based on the CMP of the underlying stock.

Today Bharti airtel futures span margin is Rs. If i want to short bharti airtel option and if i have in my account. Is it enough or extra margin is needed while shorting options? Use our SPAN calculator to add the exact Bharti airtel option contract and see the short margin requirement.

As a part of my hedging strategy…. My question is regarding the M2M for illiquid options, What if liquidity for these options completely dires up? How is the M2M in such a case determined?? While i had short the option Rs. Yash, it will be based on intrinsic value of the option. So if Nifty goes to , these calls will automatically have an intrinsic value of Hi Nithin part of my strategy I used to write both call and put at same value in every morning meant for intra day for example say if nifty in ,write the call at 40 and put at I could not understand this process.

Shorting both Calls and Puts is inherently a risky strategy! The price of an option is effected by: As a thumb rule you can assume that Rs. The instrinsic value is determined by the underlying eg. Also, if during the day if the Value of the underlying remains unchanged, you get a profit of Rs. You must be wondering who would be on the selling side of options if it is so risky Ans: All options are settled to the value of the underlying, so if you have shorted Nifty calls and Nifty closes at , your calls will be assigned at Rs Similarly if you had shorted puts it will be assigned at Hi, If i write an option, should i buy it at expiry date 0.

Assuming you already have a trading strategy in place, what is the most important factor is to contain risk. Since option writing can cause unlimited losses, you need to have a sound risk management strategy, a plan on what you will do if things went wrong.

Hi Does Zerodha platform has strategy builder as part of the trading platform or it is separate. Is there any tutorials available at your site using them. Part of the platform, check this out. How to calculate delta,gamma, theta,vega values of nifty options? From where I will get inputs like Interest Rate,Volatility,Dividend Yield for nifty options? You need to use Black Scholes for calculating greeks. 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 I have forgotten if I have already registered for NEST plus. 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 me if anybody conducting GENUINE class teaching about option writing,delta hedging,Greeks and so on…. 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. Dear Nithin, in selling a put option if due to sudden fall of any stock or nifty if the put value becomes ZERO BEFORE expiration,will I be assigned the stock or nifty the number of lot I sold initially? 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.

If I want to choose a BEST SELL strike HOW WILL I DO? For this example I am taking the data from OPTION ORACLE software. 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 joined recently as a trader in ZERODHA, One day I called to technical team regarding to take the help for trading tool … they helped me very well to understand the things and they suggested me to visit the ZCONNET to gain knowledge.

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. If NTPC starts going above and goes to in the last week, it will definitely go above Rs 5. I want to initiate a calendar spread strategy in Nov Assuming at that time nifty is trading at I decided to short sell the Nov CALL at 57 and BUY call options at to create a calendar spread.

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.

Hi Nitin, While trading in OPtions Nifty or Bank Nifty , where can I see the underlying? 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. Hi Nitin, Today Jan 2, , Bank Nifty call options strike price , traded volume contracts is 24,, does it mean only 24, UNITS are traded in the market? 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. I have tried searching lot on SPAN and there is not much clear information available which can explain how SPAN works. I have following doubts regarding SPAN and Exposure margin as I was testing few scenarios. For NIFTY Short Strangle Position: 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.

When to write Nifty options, Margin required to short sell Nifty Option

Yes, Nifty options are the most liquid instruments in the market. NIFTY is at now, and still Put option of 29th Jan has 3 Rs premium. 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.

I have been using ICICI Direct for many years. My observations on these 2 trading platforms. Will appreciate if you can clarify:. The margin requirement for option writing in Zerodha is more than that of in ICICI Direct, what is the reason for that.

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.

It is not about Zerodha or ICICI, these things are determined by the exchange. 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.

Exchanges use SPAN by Comex to determine margin requirement, our SPAN calculator mirrors that. 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. Is it possible if my short sell was MIS … Than can i my buy as NRML to hold it overnight? 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. But if you short Nifty call at 39 as MIS, you can convert MIS into NRML and hold it 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…. Case 1 i short Nifty April CE at Premium: MIS Than i must have to Buy Nifty April CE Lot: AM i Correct in case 1??? Case 2 if today, i short Nifty April CE at Premium: NRML Than i must have to Buy Nifty April CE Lot: 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. How accurate is your SPAN Margin calculator? 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.

If I buy a CE or a PE and sell it after a profit, is my transaction over? 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 Of-course the premium of Call and Put options may increase or decrease individually depending on the direction of Nifty movement, however the combined premium should decrease due to time decay assuming that volatility remains fairly stable.

By end of next trading day that is on 6-Aug , I can square-off my position and gain 7. Since there is almost always enough volatility in Nifty, I should be able to square-off my position easily and not worry about liquidity.

Unless the volatility increases significantly in 1 day, there is a high probability of gaining in this scenario. Could you please confirm if I have understood shorting of options correctly in the above 2 scenarios? If you want to learn about options, you have to check out the modules on varsity: Market moves in some direction on the next day … my profit in one option is equal to loss in other option… so am i suppose to provide any additional margin money? When you short options the profits are limited but losses are unlimited.

So the profit on one is never really proportional to the losses you make on another. But as long as they are the same, no need of more margin.

But if markets start moving against you much more, the losses will tend to start getting bigger than profits, in which case you will have to transfer money.

Can we use equity mutual funds as collateral margin? To be able to use MF as collateral, would I have to invest in mutual funds through Zerodha first?

Yes, as the value goes up of your pledged investment, you get more margins. Check row onwards on this file. Yes, if you invest another 5lks, you will have to pledge that separately. So for Rs invested, you get around Rs 80 as margins. Are there any plans by Zerodha to eventually accept mutual funds as pledge? We will start accepting them as collateral soon after that. What is the brokerage charged by zerodha for ITM options settlement at expiry day?

Please explain for both Buying and Selling. If the trader does not square off his ITM option position and settlement is done by exchange on expiry day, then in that case, is there any brokerage by Zerodha? On the expiry day nifty reaches and my sold option has a value of Rs. After exchange settlement, I get a profit of Rs. What is the brokerage in this procedure of exchange settlement? Could you please explain the reason for this? Closing price is weighted average price of last 30 mins trading.

Last traded price is the last traded price. Nithin, I have some basic questions on Options writing: Is M2M calculated on daily basis on options writing?

Would help if you can explain with an example. Let me take a hypothetical case: I write an option worth Rs on Day 1, it closes at 2. On day 2 it closes at 3. On day 3 it closes at 90 4. On day 4 I square off at There is not really m2m as such that happens when you short options. When the market moves against you, the margin required keeps going up significantly. So in a sense it is m2m of the margin that is blocked for writing options. When you are short options and market moves against you, the margin required to write also goes up.

Sir, i want to study short selling of stocks in detail and if is it allowed at BSE and NSE. Please provide me the details or any link. Short selling is nothing but selling a stock first and then buying it back. Thank u for replying, Sir u mean to say its just like normal trading hence you sell first and then buy but we can not carry such position over night we have to take delivery of these stocks.

Yes, its like normal trading where you sell first and buy later. If you sell Stock in the Futures market you can carry forward such positions i. To get a thorough understanding of how the Futures market work, do go through this module on Zerodha Varsity: Yes, if you do nothing, it will square off automatically. I know that the lot size for Nifty options is increasing to 75 for november expiry and onwards. Has the margin requirement to write options also increased?

The span margin calculator is showing that writing a PE for november would require Rs. Next day Nifty rises by 50 points, hence the margin requirement for my call shorting also increases, at the same time the margin requirement for the put short reduces. Does that mean that, at any point of time the margin requirement remains constant if I short a call and put together? Margin required to short depends on risk, and risk increases as and when an option becomes ITM from OTM for a writer.

Assume that the market keeps going up and ur call option is ITM. Now, the margin increase for shorting calls will be much higher than the margin reduction for put option. One more query that I had is, the margin that is calculated for shorting, is it for a certain range of the underlying product or is it calculated every day after the close of the market? Reduce if Nifty decreases or increase if Nifty increases. The Margins are computed on a daily basis considering factors like change in underlying, volatility, time left for expiration.

As these factors keep changing, margins also change accordingly. The Exchanges compute margins using a system called SPAN Standard Portfolio Analysis of Risk developed by Chicago Mercantile Exchange CME. Say, I write a call option for stock ABC strike price 50 and the spot price is This transaction is done at the beginning of the month. Now, Imagine on the last Thursday of the month, the spot price is 55 and the call option I sold is in the money.

What will happen if I dont square off my position before expiry and no one exercises the call option either? All in the money options get forcefully exercised on the expiry day. So exercised automatically and how much ever the option is in the money is debited from your account and given to the buyer of the option. Check the option module here: Is the margin requirement lesser under MIS same day for short selling?

In that case probably, in the SPAN calculator, you can have an option to check for margins if I am short selling under MIS. I feel that JSW Steel is going to fall, so do I buy a put option? When you are buying options there is no concept of margin, only when shorting options. For buying u need only premium, so if lot is and premium is trading at Rs 10, you need Rs 10, to buy this. Suggest you to read this: Satyajit, when you short options you need the total margin showed on SPAN calculator.

In this case it is around 86k, out of this 17k will be credited back to your account next day morning, this is the premium that you would receive for shorting the option. If you transfer money today, until the end of day it will show in Pay in amount. From next day it will show under cash balance. If you want bigger moves quickly, best to buy ATM options. SO in your case probably CE 2.

How much slipage is there in option. But mostly if you are trading Nifty options, 10 lots yeah for sure. Because I see a less buyer in some options?

Hi, I would like to know if I write nifty call option currently nifty is at Its premium is say 10 rs.

If I square it off, then will I earn rs. The expiry is 8 days away from the date of squaring off. So Instead of waiting for expiry, i square it off before expiry. Kindly guide me if I am correct. If I am wrong, please let me know how. I have following query with respect to trading. It would be great if you can please throw some light on it. This will help trader placing order in 1 shot. Hi Nitin, I would like to know about turn over calculation in option selling.

Is it in anyway different from buying? For example , if i sell nifty ce and book it ie. Any one plz tell, if nifty is at and i short call options inyraday at rs. I will get a loss of rs. Sir, I have one doubt. NMDC announced DIVIDEND on Today I wrote 7 contracts qty of NIFTY PE at 1. My stoploss was at around Rs. But in the below chart you can see a spike came at 2: If I look closely to that 2: Then how my orders are executed at Rs.

Have answered it here http: One other thing, I changed my mobile no. So I updated it in Q, CDSL easi.

But still I am not getting any EOD transaction SMS to my new no. I have contacted support several times. They have also updated new no.

But still no transaction SMS in new no.

Will have this checked and fixed. Nifty p march expiry is trending around Rs. How much margin need for this trade and how much brokerage stt etc etc of total expenses it will cost to me. You can track margin requirement here: Jai, option writing involved unlimited risks.

If you use our SPAN calculator , you can see how much margin required for shorting 1 lot of PE. It is currently around Rs So for lots Rs 17lks. All your charges you can find it out yourself using https: Dear Sir, thank you for this amazing explanation in plain and simple language. Say for March Expiry if i write 1 lot of Nifty CE and if Nifty goes above on expiry date should i need to buy it on expiry date since i will be in a loss or i can exercise the option as well Given that i do have the required balance in my account.

I sold one lot of Put options on NIFTY. I want to know whether I can get any margin on writing options for Intraday. Currently as per your margin calculator, I have to approximate pay Rs 40, to write 1 lot of Nifty. So, is there any margin available like you have for Intraday trading in the Cash market? All MIS is squared off at 3.

I have a question regarding option margin. If I have sold NIFTY-MAYPE at Rs and If nifty decreases suddenly and price of NIFTY-MAYPE increases to Rs. Though I would be in loss now, assume that on the day of expiry nifty will be above and I will be under profit. When PE goes from to , the margin required to hold this position will also go up significantly.

Was just wondering,if you guys have tools in Options segment, that could hypothetically auto calculate;. So if we are able to quickly have above info on our fingertips, Something like what Tom Sosnoff did with Think or Swim in the States- They have really empowered thousands of traders there,if u guys can do the same here,would be awesome.

One specific question when it comes to Option writing. Here is an example: In this case which of the following will happen? A A premium of Rs 0. The entire premimum of Rs 3. Your obligation of paying Rs 3. Hi Nitin, Sorry to keep bothering you on this. But, somethings are still not clear to me where overnight options writing is concerned. Here, is an example to explain the doubt in my mind. Today Jun LT — Puts were trading at around Rs 26 at 3.

At the same time I need a margin of around Rs in my account to do so….. Until I square off the 1 lot that I have the next day Jun , I will not be able to use the margin….. On Jun, I square off the option at Rs 24….. In the bargain I net Rs Rs — Rs ….. I guess this is a given. Just curious to know Nithin JI- If We buy lots say and we want to cover in just 3 points profit i.

On Nifty, yeah possible. Liquidity kind of dries up during mid-day, at those times you might have higher impact. Joshi and Nithin,I faced slippage problem trading only 30 lots of NF Options many times. I use SL-M order for buying and limit order as a Target order. So,technically 3 points is not a good idea if you considering a scalp with NF options.

Depends on which contract of options you are trading. Ideally the just OTM options are most liquid. But yes, if you are trading deep ITM or deep OTM, then yeah 3 points not a good idea. You will have to keep separate margins. You get margin benefit, check our SPAN calculator to see how much margin benefit. Sir,Nifty is at I understand buying ce or pe. But whats the benefit of buying ce or pe of next series? IF you buy next series, you can hold these options till end of July. Check option module here: Hi Nitin, Just trying to get some day trade option writing concepts clear here.

Am looking at Nifty Puts at I want to short the same now. What I see when I put these details in the SPAN calculator are: For Day Trade too? Is there something am missing here? I always wanted to trade Nifty Option. So I had to trade stock fut where I can protect the loss with SL and desired target order. Can you give any clue how to solve this issue,so I can enjoy Option scalps with Zerodha?

There may be some solution to this.. I have been trying to figure out margin required for writing weekly BANKNIFTY option but I cannot find it on Zerodha Margin Calculator. Can you provide the calculation or alternative for the same!!

I choose to WRITE OTM Options at random around points away, eg; if NIFTY SPOT is , then i WRITE CE or CE of the Current Expiry and square off my position, when my target amount of profit is achieved. My success ratio is average and my returns are not consistent. Do we need to apply technical analysis for adopting this strategy, if yes, how to go about it….. Arun, suggest you to go through the options strategies module on Varsity: Please consider this example.

I have rounded the numbers for easier understanding. I got the margin from zerodha calculator. I want to sell a call option at strike price of Span margin — 1,45, Exposure margin — 90, Total margin — 2,35, Premium receivable — 10, Now assume the premium is Rs.

If by expiry the premium stays below 10, should I square off just let it be? If by expiry the premium goes above 10, can I square of at say Rs.

If before expiry the premium drops to 2, can I square off to book Rs. Will my total margin get credited back automatically to my account when I Square of or dont square off on expiry? It is upto you. You can either hold or let it be. Whatever the stock closes above , that much premium will get reduced from your account.

Yes, end of day the margin gets unblocked. Say some stock for eg: In this case, will be credit to my account. If the stock close above for eg: If the stock closes at , then will be deducted, right?

In the above selling scenario case, how much amount would have blocked, considering 15 more trading days exist before expiry? Since you have written the option, you have already paid STT when writing. Use our SPAN calculator: Dear Nitin ji i heard about leap options of Nifty is available, what is eligibility to trade Leap options. Need help to understand regarding Index options. Suggest you to go through the options module here: I have written 5 lots of options in USDINR Now there is no liquidity at this level.

But, I have still have open position for the same. What will happen to my position on expiry? On expiry day, all options are settled to the reference rate given by RBI. Check this module , has explanation. Sometimes I find that buying a call earns you better profits rather than selling a put of the same strike price.

Yet other times, selling a put earns you better profits rather than buying a call of the same strike price. Why is this so? Ah no easy one line answer for this. When I try to short any option the initial margin ask price is very high and when the order gets executed, the margin blocked is very less.

Why do I require so much more money to short options as compared to buying options? - Zerodha trivia - Trading Q&A by Zerodha - All your queries on trading and markets answered

When I placed a short order of 4 lots quantity of Nifty JUL PE, as the order was in the queue yet to be executed on my price, I saw that the margin blocked was around 90K and later when the order got executed, the actual margin that was blocked was only around 29K. I am guessing you had other positions open in your account. Exchanges block margin on portfolio once a position is taken. So if you were shorting puts and you were say short futures, that is lesser portfolio risk and hence margin required for both positions would reduce.

You can use our SPAN calculator to check margin benefits. HOW STOPLOSS TRIGGER IN OPTION WRITING , IF I WRITE IDEA CALL AT 5RS PREMIUM SAY LOT SIZE IS PRMIUM RECEIVED IS AT WHAT PRICE OUR STOPLOSS TRIGGER,. Suggest you to go through options module http: Now it is 0. What will happen if it is expired. NITIN SIR , Please explain the stoploss trigger in call writing by system if i dont place any stoploss…. Hi Sahil, I suggest you go through this blog to know more about Stop loss order.: You are right, the margin just gets blocked, it is always in your account only.

Once u exit, the margin gets unblocked. At the end of the day, for example, it goes to 1. If I wait till the next day, will they take any extra margin next day also?

Same way, for example, it goes to 2. In this case will they take any extra margin next day also? If the option goes against you, the margin increases. If option goes in your favor, margin reduces.

Is it cash or it can be stocks as collateral as well? If my understanding is correct it can be Please correct me if am missing something. Current Bank Nifty is around Now, if I put Margin with Are my numbers correct?

Do I have to pay any interest DPC on stock being used as collateral instead of cash? I am guessing u r talking about puts. Assume I sold a put option at the beginning of the new series. After few days, I realized that it is going against to my expectations. Can I square off my short position before the expiry date?

I just want to know whether I can stop getting in to unexpected loss. Absolutely you can exit any time you want. In such case, you will have to say buy futures to book your loss. Whenever the liquidity arrives in the option contract, you can exit both together. Thanks for your valuable information and sharing such a nice idea to overcome the risk. I have not seen such a kind of guy like you.

Most of the people afraid of sharing info to others by thinking that they will benefit out of it. Even I myself feel the same. In continuation to my earlier question, how to identify whether call or put writing has taken place on a perticular strike price. Also, how to identify call or put buying has taken place in considerable amount on a perticular strike price. Is there any indicator something to measure this? Nizam, if open interest goes up, it means option writing is happening. But this also means that people are buying more options.

So check for open interest. Do you mean the Open Interest of a particular call strike? Nikunj, all options in India are european, so they exercise automatically. In case market goes up and call price goes to Hello Nithin, I am Asit Maurya. I want to know something. Your best bet to trade bigger quantities is Nifty futures and options.

Indians are not allowed to trade derivatives in International markets, only equity investment. It got cancelled and showed that I can only place an order quantity below shares. How to remove this. Dear Nithin sir, suppose i sell nifty call at 50 rs , if nifty crossess , to hedge my position in future how many number of future lots to be buy to hedge my postion and what is the formula for this….

Hi Sir, The post is awesome. If yes then how much it will be? Do my broker will square off the position without asking? If the total goes down lets say then what about the extra margin amount that i have paid?

If the combined premium goes up over , that means you have started making losses. If the lot size is , if the combo goes to , it means you are making losses of Rs So yes, margin goes up when the premium goes up.

Margin to write SBI calls will be around 80 k to 90 k. So say when you start making notional loss of upwards of Rs when call goes to 8 and above. I want to trade covered strategy in Nifty selling like: Nifty spot price on 24rd Nov is and i am writing Put and Call…at expiry nifty is at say so i will get full premium for both side…in option chart we can see that there can be seen strong base at PUT and CALL OTM side…can i use that data to trade both side..??

Also suggest you to go through the option module here: In option chart there is highest OI at PUT of 6,, and highest OI at CALL of 3,,…. Thanks for the reply…One case study i am indicating.. Please suggest me…At Nov 25, there is strong support of OI at PUT and CALL…But there is much more OI at PE than CALL…it is happening at every month so i will consider CALL or PUT based on highest OI at expiry for next month trade.. Am i thinking right..?? Hiren, I suggest you read up about Max pain theory and how to read Put call ratio numbers on Varsity here: