Discount Broker Comparison

bpr

Well-Known Member
Good explanation of span margin and exposure margin here
https://tradingqna.com/t/wat-is-the-difference-between-span-margin-n-exposure-margin/4142
Exposure margin is indeed at the discretion of broker i.e optional
Thus explains why exposure margin can vary between brokers.

I doubt though if it is really decided by broker or PCM who clear the trades

Currently SPAN is varies from 5 to 10% for most equity derivatives.

lets just say average is 7.5%

on top Zerodha charge 5% exposure margin for all equity derivatives and 3% for index derivatives.

So to mitigate 1% risk they are charging almost double the span margin hmm

that explains why I felt margin is always high ...
 
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Apart from brokers using our margin to mitigate the risk story ... can you think of other ways they (brokers) use it.

For example, using the margin pool to put a risk free trades like selling far out of money options,
Is selling far out of money options is a risk free trade.
or
Some risk is associated.
Please clarify.
Thanks
 

pannet1

Well-Known Member
Is selling far out of money options is a risk free trade.
or
Some risk is associated.
Please clarify.
Thanks
That depends on how far out you are selling and how much time you have for expiry.

In general you can assume all options available in the chain may in some month or week will become in the money. So Selling is anyway risky.
 
That depends on how far out you are selling and how much time you have for expiry.

In general you can assume all options available in the chain may in some month or week will become in the money. So Selling is anyway risky.
Yes, I know that selling option is always risky.

But asked for a clarification because you mentioned in your previous post
"For example, using the margin pool to put a risk free trades like selling far out of money options"

But let us assume that if one writes far OTM options just on expiry day or 1-2 days before that, then it may be a safe trade unless one has a bad luck, (like that of this expiry for BN call writers :D ) and let the option expire as OTM. No need to square off, no need to pay brokerage and other small charges and have the premium earned in ones pocket. Right na !!
 

pannet1

Well-Known Member
Yes, I know that selling option is always risky.

But asked for a clarification because you mentioned in your previous post
"For example, using the margin pool to put a risk free trades like selling far out of money options"

But let us assume that if one writes far OTM options just on expiry day or 1-2 days before that, then it may be a safe trade unless one has a bad luck, (like that of this expiry for BN call writers :D ) and let the option expire as OTM. No need to square off, no need to pay brokerage and other small charges and have the premium earned in ones pocket. Right na !!
The profit part is OK. Mostly its beyond any bad luck. I am talking about premium in Paise. But the no of options sold is very high. The Selling is initiated on the day of expiry.