Margin required for to excese an option

[ajfrod]

I asked kotak securities they told me the formula is
Margin required for selling an option = {Strike price * lot size}/ multiple.
What is the multiple?
Please Explain
Thanks

 

[dr.mariappan]

dear member
sorry for my error, I mean only multiple, not the formula. Any how I am glad that you got the information

 

[rajeeve6600]

kudoos to Mariappan...

 

[ajfrod]

I have asked kotak sec.
They told me the multiple for nifty is 5.
How does one get 5.
Guess i have to look at the brokers site to find out the multiple?
Any know how they get it?

 

[rajeeve6600]

I have asked kotak sec.
They told me the multiple for nifty is 5.
How does one get 5.
Guess i have to look at the brokers site to find out the multiple?
Any know how they get it?

As per icicidirect(iam doing) the margin details to short option is as under :

example


1.Lets sell 5 lot of nifty 3000 put trading at premium of 100 now..

Then the initial margin required in your account = ((3000+100)*50*5)*.14

= 108500

Minimum margin u need to maintain = ((3000+100)*50*5)*.11

= 85250...

U need to maintain the minimum margin till u square off the trade...


generally for nifty the formula can be

Initial margin required = (strike price + premium)*50*no.of lots*0.14
Minimum margin required = (strike price + premium)*50*no.of lots*0.11

Hope its clear...:thumb:

 

[AW10]

Multiple 5 or constant 0.14 or 0.11 in above example relates to what % of total liability, the broker wants as security deposit. so when u sell 3000 option of nifty, your liability for 1 lot is (3k+premium)*50 = 150k. Kotak wants 1/5 = 20% of this as deposit and ICICI wants 14%.

Happy Trading.

 

[ajfrod]

Does one need a margin to square off an option?

 

[rajeeve6600]

Does one need a margin to square off an option?

Absolutely NOT!!! here we are discussing about selling a nifty contract..