Comment on Basics on Options Shorting/Writing

Nithin Kamath commented on 02 Jul 2014, 07:34 PM

Guc, what you need to realize is that the risk for such contract is never limited, there is always a big execution risk which is open and one of the reasons why margins are higher.

What if while exiting you got out of your buy 8200 CE position and market suddenly bounced up in this little time? The risk on your short 8100 CE would then be unlimited. Unless the spread itself starts trading on the market (similar to calendar spreads), it will never be possible to block margins based on what you have suggested. Also, this is an exchange regulation and the SPAN calculator gives what exchange asks us to block.

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