# Margin Query

#### Vineet19

##### New Member
How a margin is calculated in the following scenario-

I bought 1 lot of NIFTY @ 7400 and sold a Call option of Strike Price 7600 at a premium of Rs. 23.

I would be grateful for an answer to this.

#### manishchan

##### Well-Known Member
How a margin is calculated in the following scenario-

I bought 1 lot of NIFTY @ 7400 and sold a Call option of Strike Price 7600 at a premium of Rs. 23.

I would be grateful for an answer to this.
Your broker will block the total margin for NIFTY Futures. i.e 30,000
and for Call Options short, they will block (Total Margin - Premium you recieve).

#### Vineet19

##### New Member
Thanks for the reply.

But sir this hedging I suppose.?

Still not clear.

#### manishchan

##### Well-Known Member
Thanks for the reply.

But sir this hedging I suppose.?

Still not clear.
No Sir plz..

Yes it is hedging naa... You are buying NF and selling Call Options. If you buy Options.. you need to pay only the premium but if you short options, then you have to pay the diffeence between the margine required and premium you receive by shorting.

##### Active Member
I think because of this hedging margin will be less than simply selling call@7600 (without hedging). But it all depend on your broker.

##### Well-Known Member
Apart from margin,

THIS IS NOT HEDGING (Hedging means, irrespective of worst kind of upswing or downswing, you wont lose more than a certain amount) (hope i have read your post rightly without missing anything)

You are lucky that markets have rebound, else had market fallen below 7377, you could have lose money without any limit i.e. if market fall to 6500, yous would lose 877 points.

Beside it no matter how high market goes as such 8500 or 9500, you wont earn more than 223 points.

Hence I dont think broker will reduce margin for this pair. You will simply receive or pay MTM on daily basis, and you will need margin of 2 lot NF, i.e. 60/65/70K approx.

#### manishchan

##### Well-Known Member
Apart from margin,

THIS IS NOT HEDGING (Hedging means, irrespective of worst kind of upswing or downswing, you wont lose more than a certain amount) (hope i have read your post rightly without missing anything)

You are lucky that markets have rebound, else had market fallen below 7377, you could have lose money without any limit i.e. if market fall to 6500, yous would lose 877 points.

Beside it no matter how high market goes as such 8500 or 9500, you wont earn more than 223 points.

Hence I dont think broker will reduce margin for this pair. You will simply receive or pay MTM on daily basis, and you will need margin of 2 lot NF, i.e. 60/65/70K approx.
Hedging is nothing but taking a 2nd position to protect the 1st one. He is buying nifty futures and to protect the fall he is selling Calls. I dnt know whtz his strategy around selecting the strike price. Strike might be right or wrong. But the strategy is definitely like a hedging. Isn't this Covered Call strategy ? I'm sure it is

If one writes options, the broker reduces the margin. ie they will block the margin after reducing the premium you receive. Here is Zerodha's link. Check it out. https://zerodha.com/margin-calculator/SPAN/

##### Well-Known Member
Sir, How come he is protecting himself from fall of nifty ???

Perhaps you didn't read my post thoroughly

"You are lucky that markets have rebound, else had market fallen below 7377, you could have lose money without any limit i.e. if market fall to 6500, yous would lose 877 points"

Where is the protection sir ?

If market fall to 5000 he will be losing 2377 points!

He is buying nifty futures and to protect the fall he is selling Calls. But the strategy is definitely like a hedging. Isn't this Covered Call strategy ? I'm sure it is

If one writes options, the broker reduces the margin. ie they will block the margin after reducing the premium you receive. Here is Zerodha's link. Check it out. https://zerodha.com/margin-calculator/SPAN/

#### rajesh.vashisht

##### New Member
make this position more safe..buy 1 put option of 7400 strike.

#### rajesh.vashisht

##### New Member
you bought one nifty ...around 30000 blocked.. and for selling 7600 call you need full nifty margin..however with some brokers you will need less margin as your risk of 7600 call short is protected till you hav nifty long...so margin might be 10000...