A question relating to HDFC security regarding COVERED CALL

[mmca2006]

Can any body confirm me whether HDFC security permits to Sell Call ( covered call ) against any share holdings in their Dmat A/c/, i.e Do they provide any margin against the shares in their Dmat A/c?

 

[billgates]

Yes. HDFC allow shares as collateral. Please check the below link.

http://www.hdfcsec.com/sharesascollateral/201403221534277102761

:thumb:

 

[mmca2006]

Yes. HDFC allow shares as collateral. Please check the below link.

http://www.hdfcsec.com/sharesascollateral/201403221534277102761

:thumb:

billgates
thanks for the link where it is stated ---
"If you see a trading opportunity in stocks in the F&O segment and you don’t have the funds to place the order, you can still create limits to invest and trade. Then you can bring in the funds by T+1 day."
So this facility is just for T+1 day !!! Am I missing anything?
I want to sell call against my holding in my DEMAT A/c but they will allow me just for T+1 day against my shares , after that I have to bring cash , so I have to keep shares in DEMAT a/c as well as cash to sell call !!!!

 

[gmt900]

billgates
thanks for the link where it is stated ---
"If you see a trading opportunity in stocks in the F&O segment and you don’t have the funds to place the order, you can still create limits to invest and trade. Then you can bring in the funds by T+1 day."
So this facility is just for T+1 day !!! Am I missing anything?
I want to sell call against my holding in my DEMAT A/c but they will allow me just for T+1 day against my shares , after that I have to bring cash , so I have to keep shares in DEMAT a/c as well as cash to sell call !!!!

I am not sure about HDFC but most brokers allow margin against shares in D mat account with hair cut but you have to pay interest @ 24% p.a. I think it is charged for no of days for which you use the facility. So, you will have to calculate the possible gain from short position which should be more than the interest.
Incidentally, I feel it may be worthwhile using this facility when IV spikes before an event like budget. It will make more sense to pay interest then, since then the premium collected will be substantial

 

[billgates]

billgates
thanks for the link where it is stated ---
"If you see a trading opportunity in stocks in the F&O segment and you don’t have the funds to place the order, you can still create limits to invest and trade. Then you can bring in the funds by T+1 day."
So this facility is just for T+1 day !!! Am I missing anything?
I want to sell call against my holding in my DEMAT A/c but they will allow me just for T+1 day against my shares , after that I have to bring cash , so I have to keep shares in DEMAT a/c as well as cash to sell call !!!!

As for as I know untill your share collateral meets the margin requirement there is no problem. If there is margin shortfall then HDFC may sell your shares under hold.
I will advice that you clarify all you doubt's with HDFC customer care before start using this facility.

 

[mmca2006]

I am not sure about HDFC but most brokers allow margin against shares in D mat account with hair cut but you have to pay interest @ 24% p.a. I think it is charged for no of days for which you use the facility. So, you will have to calculate the possible gain from short position which should be more than the interest.
Incidentally, I feel it may be worthwhile using this facility when IV spikes before an event like budget. It will make more sense to pay interest then, since then the premium collected will be substantial

I appreciate your view though I have different opinion, budget / result comes once in a year , and I do not want to keep my share idle for rest of the year , if I short far otm call of next month , 10 % away from current strike price , with roll up option, if at all required , I can earn some money on yearly basis. Others' view solicited.

 

[gmt900]

I appreciate your view though I have different opinion, budget / result comes once in a year , and I do not want to keep my share idle for rest of the year , if I short far otm call of next month , 10 % away from current strike price , with roll up option, if at all required , I can earn some money on yearly basis. Others' view solicited.

It's very simple. If you can earn more than the interest you are paying, it makes sense to use the margin available against shares in Dmat account.

 

[billgates]

I appreciate your view though I have different opinion, budget / result comes once in a year , and I do not want to keep my share idle for rest of the year , if I short far otm call of next month , 10 % away from current strike price , with roll up option, if at all required , I can earn some money on yearly basis. Others' view solicited.

Have you checked with HDFC sec are they charging interest for fund utilized against stock collateral.

 

[sditn]

collateral facility is available only fr taking position in futures & selling an option...

it allows an trader to use his existing stocks of demat a/c to create limits for trading in Future and Options segment (limit is provided as per haircut value) but if funds are not brought in T+1 day, interest is applicable approx 18% per annum... suggest u contact their customer care desk for detailed info..

 

[mmca2006]

collateral facility is available only fr taking position in futures & selling an option...

it allows an trader to use his existing stocks of demat a/c to create limits for trading in Future and Options segment (limit is provided as per haircut value) but if funds are not brought in T+1 day, interest is applicable approx 18% per annum... suggest u contact their customer care desk for detailed info..

I already talked to their customer care , they told me every thing other than 18 % interest :annoyed:, they also informed me that M2M adjustment will be done every day with my saving account. Thanks lot for your information regarding 18% interest.