SPAN Margin

#1
Hello How are you people.

Need to know SPAN Margin for the following portfolio as each broker is charging a different amount

All Feb Series, each one lot.

5500 Call Sell
5500 Put Buy
5200 Call Buy
5200 Put Sell

-Talon
 
#2
Yesterday I shorted
4800CE 29Mar for 605.75
4800PE 29Mar for 39.1
A premium of 32242 was credited to my account. Margin of 64903 was debited from my account. Does it seem normal? I am new to options trading. Thanks.

Also, what do you think of this position taken?
 

ethan hunt

Well-Known Member
#3
Hi, I am also totaly confused at the margin / mtm requirements policy of brokers.

Anyways my LOGIC says:

You have shorted CALL & PUT so you will receive premium of 605+39 = 644 x 50 (lot size) = 32200

Broker will block margin which seems to be 32451 per lot x 2 = 64903 approx

Now the point to note: What is the actual total outflow of funds: Is it 64903-32200 = 32703 ?

OR some other figure ?

Your should not be liable for MTM as the positions are hedged.

Regarding how safe the strategy is only expirenced traders can enlighten us.

Seniors / Experienced option traders, kindly comment.

BTW: I have also posted some questions at http://www.traderji.com/search.php?searchid=3444871 for clarifications on options.

Thanks,
 
Last edited:
#4
And everyday, I receive a margin report in which that margin blocked amount keeps changing. Is it as per MTM? Or does it change because of daily change in margin requirements?
 

ethan hunt

Well-Known Member
#5
If I recall correctly, I've read somewhere, NSE revises margin 6 times a day !!! Once at open (or is it before open), 4 times during market hrs & finally after close. Maybe that's why margin blocked changes everyday. This also means if there is large volatilty the margin can be revised drastically & you can be asked to pay fresh margin in addition to what is already blocked, this in turn means you should not invest total funds but keep margin revision requirement funds handy to avoid auto sq off.

I think, (often I am wrong :D ) your position will get best return when you let exchange automatically exercise/settle the positions on expiry, but STT (at several times more than normal rate) is charged for exercising the short options. This is for ITM. So if you short you pay STT (normal rate) & if this short is exercised/settled on expiry by exchange you again pay STT (at several times more than normal rate) !!!

Maybe, if option is liquid & ITM you can cover position a few days before expiry to avoid STT (at several times more than normal rate) as buying option is not subject to STT.

Play safe keeping Nick Leeson in mind for what not to do with options.

confusion..confusion

Expert's comment invited...
 
Last edited:

gunsho

Well-Known Member
#6
Yesterday I shorted
4800CE 29Mar for 605.75
4800PE 29Mar for 39.1
A premium of 32242 was credited to my account. Margin of 64903 was debited from my account. Does it seem normal? I am new to options trading. Thanks.

Also, what do you think of this position taken?
Shorting when you are new looks bit dangerous. It is strongly advisable to do all calculation/math before we initiate the trade.

In this position, if market goes above 5444.85 during expiry there will be losses. I hope you have exit strategy in place for that? It is less likely that market will go below 4160 (which is the other BEP).
 
#7
Hello How are you people.

Need to know SPAN Margin for the following portfolio as each broker is charging a different amount

All Feb Series, each one lot.

5500 Call Sell
5500 Put Buy
5200 Call Buy
5200 Put Sell

-Talon
I got this cleared from NSE chennai office, for this position it require SPAN Margin of 1400/- and initial margin, which is 5% and also SPAN changes 6 times a day,in total it should not exceed 5000
But brokers can ask of margin as per client goodwill though exchange would expect only the above said minimum.
 
#8
Thanks gunsho. How do we calculate BEP for abovementioned trade?
I have decided to exit this position if 4800CE > 805. i.e. a loss upto Rs.10k. Any suggestions are more than welcome.
 

gunsho

Well-Known Member
#10
Thanks gunsho. How do we calculate BEP for abovementioned trade?
I have decided to exit this position if 4800CE > 805. i.e. a loss upto Rs.10k. Any suggestions are more than welcome.
644.85 is the total premium received by the above positions. Call strike price + 644.85 will give you the upper BEP and Put price - 644.85 will give you the lower BEP.

May I suggest you to download Options Oracle and enter the above positions? It will give you various details like BEP, max profit, max loss etc.. It is free but beautiful software for option trading. You can try various strike prices on your strategy before you initiate the trade itself.
 

Similar threads