New margin requirement for popular futures and options strategies http://optionhydra.com

1. NEW MARGIN
REQUIREMENT
FOR POPULAR
FUTURES AND
OPTIONS
STRATEGIES
New Margin Trading
Framework - June 2020
www.optionhydra.com

2. www.optionhydra.com
What is the New Margin
Framework?
• SEBI review of margin framework is expected to bring
down margin requirements for traders in the futures and
options (F&O) segment
• New Margins are likely to be effective from 1st June 2020
onwards
• Margins on Hedged Futures and Options Strategies where
the trading risk is limited are likely to be reduced by 60-75%

3. www.optionhydra.com
Naked Nifty Futures Margin
• The margin required for unhedged or naked FNO positions
is likely to go up slightly.
• Current Margin for Naked Futures 16.7%
• Revised New Margin for Naked Futures 18.5%

4. www.optionhydra.comF&O Margin Components –
SEBI circular mandates brokers to collect the complete SPAN + Exposure margin to
carry forward Futures and Options positions to the next day
Span Margin is the minimum requisite margins blocked for futures and
option writing positions as per the exchange's mandate
Exposure Margin is the margin blocked over and above the SPAN to
cushion for any MTM losses
Total Margin = Span Margin + Exposure Margin – Spread Benefit
Margin Benefit is the margin offset passed on to the trader because of
the low risk in the option strategy
Spread Benefit is the margin offset passed on to the trader because of
the low risk arbitrage trades

5. www.optionhydra.com
Nifty Futures Long/Short
Product
• June Futures
@ 9482
Quantity
• Buy 75
shares
Total Contract
Value
• Rs 7,11,150
Span
• Rs 1,20,330
Exposure
Margin
• Rs 14,241
Total Margin
• Rs 1,34,571
Product
• June Futures
@ 9482
Quantity
• Sell 75
shares
Total Contract
Value
• Rs 7,11,150
Span
• Rs 1,21,350
Exposure
Margin
• Rs 14,249
Total Margin
• Rs 1,35,599

6. www.optionhydra.com
Hedged Futures with
ATM Options
Product
• June Futures
@ 9482
• June 9600PE
Quantity
• Buy 75
shares
• Buy 75
shares
Margin
Benefit
• Rs 1,16,362
Span
• Rs 3,969
Exposure
Margin
• Rs 14,241
Total Margin
• Rs 18,210
Product
• June
Futures @
9482
• June
9600CE
Quantity
• Sell 75
shares
Margin
Benefit
• Rs 1,09,147
Span
• Rs 10,797
Exposure
Margin
• Rs 14,241
Total Margin
• Rs 25,038

7. www.optionhydra.com
Put-Call Parity Arbitrage
Product
• June Futures
@ 9482
• June 9600CE
• June 9600PE
Quantity
• Buy 75
shares
• Sell 75
shares
• Buy 75
shares
Margin
Benefit
• 2,29,085
Span
• Rs 3,969
Exposure
Margin
• Rs 28,612
Total Margin
• Rs 32,580

8. www.optionhydra.com
Nifty June-July Futures Spread
Product
• June Futures
@ 9482
• July Futures
@9483
Quantity
• Buy 75
shares
• Sell 75
shares
Margin
Benefit
• Rs 2,51,476
Spread
Benefit
• Rs 23,727
Span
• Rs 13,089
Exposure
Margin
• Rs 28,470
Total Margin
• 17,832

9. www.optionhydra.com
Nifty ATM CE/PE Options Selling
(Naked)
Product
• Jun Options
Strike
• Sell 9600CE
Quantity
• 75 Shares
Span Margin
• Rs 1,12,724
Exposure
Margin
• Rs 14,370
Premium
Receivable
• Rs 16,935
Total Margin
• 1,27,094
Product
• Jun Options
Strike
• Sell 9600PE
Quantity
• 75 Shares
Span Margin
• Rs 1,18,264
Exposure
Margin
• Rs 14,370
Premium
Receivable
• Rs 24,908
Total Margin
• 1,32,634

10. www.optionhydra.com
Nifty OTM CE/PE Options Selling
(Naked)
Product
• Jun Options
Strike
• Sell 10000
CE
Quantity
• 75 Shares
Span Margin
• Rs 88,086
Exposure
Margin
• Rs 14,370
Premium
Receivable
• Rs 6,000
Total Margin
• 1,02,456
Product
• Jun Options
Strike
• Sell 9200PE
Quantity
• 75 Shares
Span Margin
• Rs 91,738
Exposure
Margin
• Rs 14,370
Premium
Receivable
• Rs 13,133
Total Margin
• 1,06,108

11. www.optionhydra.com
Nifty ITM CE/PE Options Selling
(Naked)
Product
• Jun Options
Strike
• Sell 9000 CE
Quantity
• 75 Shares
Span Margin
• Rs1,56,453
Exposure
Margin
• Rs 14,370
Premium
Receivable
• Rs 46,099
Total Margin
• 1,70,823
Product
• Jun Options
Strike
• Sell 9200PE
Quantity
• 75 Shares
Span Margin
• Rs 1,48,215
Exposure
Margin
• Rs 14,370
Premium
Receivable
• Rs 43,905
Total Margin
• 1,62,585

12. www.optionhydra.com
Short Straddles (Credit Strategy)
Product
• Jun Options
Strike
• Sell 9600CE
• Sell 9600PE
Quantity
• 75 Shares
• 75 Shares
Margin
Benefit
• Rs 1,12,724
Span Margin
• Rs 1,18,264
Exposure
Margin
• Rs 28,741
Premium
Recievable
• Rs 41,843
Total Margin
• 1,47,004

13. www.optionhydra.com
Short Strangles (Credit Strategy)
Product
• Jun Options
Strike
• Sell 10000CE
• Sell 9200PE
Quantity
• 75 Shares
• 75 Shares
Margin
Benefit
• Rs 88,086
Span Margin
• Rs 91,738
Exposure
Margin
• Rs 28,741
Premium
Recievable
• Rs 19,133
Total Margin
• Rs 1,20,478

14. www.optionhydra.com
Bear Call Spread (Credit Strategy)
Product
• Jun Options
Strike
• Buy 9600CE
• Sell 10000CE
Quantity
• 75 Shares
• 75 Shares
Margin
Benefit
• Rs 84,984
Span Margin
• Rs 27,740
Exposure
Margin
• Rs 14,370
Premium
Receivable
• Rs 10,935
Total Margin
• Rs 42,110
Bull Put Spread (Credit Strategy)
Product
• Jun Options
Strike
• Buy 9200PE
• Sell 960PE
Quantity
• 75 Shares
• 75 Shares
Margin
Benefit
• Rs 89,796
Span Margin
• Rs 28,468
Exposure
Margin
• Rs 14,370
Premium
Receivable
• Rs 11,775
Total Margin
• Rs 42,838

15. www.optionhydra.com
Call Calendar Spread (Debit Strategy)
Product
• Jun Options
• Jul Options
Strike
• Sell 9600CE
• Buy 9600CE
Quantity
• 75 Shares
• 75 Shares
Margin
Benefit
• Rs 1,03,930
Span Margin
• Rs 8,794
Exposure
Margin
• Rs 14,370
Total Margin
• Rs 23,164
Call Diagonal Spread (Debit Strategy)
Product
• Jun Options
• Jul Options
Strike
• Sell 9800CE
• Buy 9600CE
Quantity
• 75 Shares
• 75 Shares
Margin
Benefit
• Rs 94,135
Span Margin
• Rs 5,615
Exposure
Margin
• Rs 14,370
Total Margin
• Rs 19,986

16. www.optionhydra.com
Long Butterfly (Credit Strategy)
Product
• Jun Options
Strike
•Sell 9600CE
•Sell 9600PE
•Long 9500PE
•Long 9700CE
Quantity
• 75 Shares
• 75 Shares
• 75 Shares
• 75 Shares
Margin
Benefit
• Rs 2,23,550
Span Margin
• Rs 7,438
Exposure
Margin
• Rs 28,741
Premium
Receivable
• Rs 7,058
Total Margin
• Rs 36,178
Long Iron Condor (Credit Strategy)
Product
• Jun Options
Strike
•Sell 9500PE
•Sell 9700PE
•Long 9400PE
•Long 9800CE
Quantity
• 75 Shares
• 75 Shares
• 75 Shares
• 75 Shares
Margin
Benefit
• Rs 2,10,253
Span Margin
• Rs 7,144
Exposure
Margin
• Rs 28,741
Premium
Receivable
• Rs 5,959
Total Margin
• Rs 35,885

17. www.optionhydra.com
Major
Highlights
Overall Reduction in Margin on Spread Trades & Hedged
Future Trades, Straddles & Strangles
The ROI of hedged strategies will go up.
Most likely a good opportunity for Naked Sellers to hedge
their risk with reduced margins.
And Naked Buyers can adopt better trading strategies by
hedging.
The margin required for naked positions will be higher and
tied to the volatility in the market. If volatility increases
margins will increase and if the volatility decreases the
volatility will be reducing.

18. www.optionhydra.com
Major
Highlights
Price Scan Range (PSR) which is used to assess
the FNO margin for worst-case scenario loss
has been scaled up to 6σ (sigma) from earlier
3.5σ, which will make the margin requirement
somewhat dynamic as when markets volatility
picks up, the margin required for naked
positions will be higher and will be reduced as
the volatility in the market subside.
In derivatives, the large notional margins
getting applied due to option minimum margin
and Extreme Loss Margin (ELM) being which
accounts for the high margin requirement. As
the new margin framework came into
existence, the ELM is approximately halved
which reduce the notional component of the
margin.

19. OPTION
HYDRAWWW.OPTIONHYDRA.COM
90 hours of
Online
Mentorship
Program for
Option Traders
who want to take
view using
Market Profile

20. www.optionhydra.com
THANK YOU