Comment on Option buying: The riskiest trade out there

Naveen commented on 22 Oct 2021, 07:47 PM

Hi Nithin

I have a long future and i want to buy far OTM option to hedge downside risk but I am not able to buy the hedge. If far OTMs are disabled in interest, by the same logic, shouldn’t zerodha allow customers to hedge their downside risk in long futures ? Below is the response i got from support team.

As per the query, In order to use baskets to buy Nifty and Bank Nifty options outside the allowed range, you will have to first enter the Sell leg in the Basket. Once you’ve entered the Sell leg, you can enter the Buy leg/order.

The margin requirement might slightly be higher when you’re entering the sell leg. However, after entering the buy leg, the final margin will be blocked according to the hedge. This is because we allow outside the range Buy legs at par with the Short leg so you can hedge.

We see that there was no sell leg, hence the error.

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