Comment on Zerodha F&O margin Calculator

Krishnamurthy B. commented on 27 Apr 2015, 10:10 AM

Dear Nithin,
First of all, thanks for patiently answering my query, and happy to find someone at an Indian brokerage who understands this topic well enough to engage in an open conversation about it…
I understand that it is the Exchange that specifies the Margin needs and not you. However, the logic given to defend this unreasonable margin charge by NSE is not rational. If I attempt to close my Long 8800 Puts before my Short 8500 Puts, margin would be due at that time – as if I am taking a fresh Naked Short position. Execution risk on close-out of combo position is easily avoided if NSE just closes the Short position before the Long one.
Besides, this is a standard strategy named Bear Put Spreads (or Long Put Spreads), for which NO OTHER Exchange/Broker IN THE WORLD outside India charges a Margin. You can check it out at CBOE’s margin calculator site:
They all treat these Vertical Spreads as much safer than Calendar Spreads !!
By the way, all other exchanges also use the same SPAN tool from CME that NSE uses.
So, NSE charging these high Margins on such Long Spreads is really highway robbery (swallowing like a month’s worth of Interest on the undue Margin money)…
As an individual investor, I have little leverage to protest this with NSE. So, I hope that big broker members like you would help protest this practise of NSE instead of defending it.
This practise hurts you as much (if not more than) it hurts small timers. It also distorts option prices and kills the market for Deep In The Money options until close to expiry…
So, I hope to get your support for pushing NSE to recognize Vertical Spreads and stop this distortion…
Thanks. Krish

View the full comment thread »