Comment on Basics on Options Shorting/Writing

Nithin Kamath commented on 09 Jan 2014, 07:32 PM

Prabhakar,

The margins blocked are as per the exchange requirements, and yes the Indian exchanges are extra stringent about this.
Coming to your example, Long 6200 call and Short 6400 call, and assume only Rs 10,000 is blocked for this(the buy premium). what happens if Market bounces up, 6200 calls have 0 liquidity, and 6400 calls positions are making a huge loss? Yes the scenario is unlikely, but possible.
I guess the only way such spreads will become popular is if NSE starts letting people trade the spreads directly itself, similar to calendar spreads. Check the 1st image on this blog, where you can see an OCTNOVFUT spread trading at 42.

Cheers,

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