How to write covered calls

[kdnitinkalra]

hello traderji,
i want to know how to write covered calls(also called buy write stratergy) on stock ,which i purchased say for example gujrat ambuja at rs 102/share,which has a lot of 2062 parcel of shares.i wrote a call option against shares purchased at 105 strike price to collect time premium.
will i have to pay 20% margin for selling a call option which will changes daily mark to market,or my shares will be used as a collateral by options clearing house.what will be scenario at expiry?will my stock be called away if share price is above 105 or i have to cash settle sold option transaction individually offsetting loss above 105 by gian in the underlying shares i own.

 

[ivanboesky]

Yes, you will have to pay the 20% margin for the call option sold, and it will be marked to market everyday. There is no cross margining in India between the cash and F&O segment, which is why you will have to put up the margin. If the stock closes above 105 on expiry, you will have to settle in cash, not by delivery of the shares.

 

[jimoan]

There is no cross margining in India between the cash and F&O segment
What ? that is xxxxx...
If both products are supervised by the same exchange then why not
This is taking the retail investor for a ride...

 

[beginner_av]

there isn't...neither do they waive margins for spreads

 

[rkkarnani]

I do not fully understand the technical terms but have been told that he margines are lower for spreads. ALSO I read the following on NSE site :
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Calendar Spread Charge
The margin on calendar spread shall be calculated on the basis of delta of the portfolio consisting of futures and options contracts in each month.
A Calendar spread positions will be treated as non-spread (naked) positions in the far month contract, 3 trading days prior to expiration of the near month contract.

Net Option Value
Net Option Value is computed as the difference between the Long Option positions and the Short Option positions, valued at the last available closing price of the relevant option contract.