How can I reduce margin requirements for F&O trades?
Margin requirements for F&O trades can be reduced considerably by hedging your positions. To elaborate, margin requirements for:
- Future long positions can be reduced by buying a put option. For example:
| Strategy | Position | Margin Required |
|---|---|---|
| 1 | Position 1- Buy 1 lot of Nifty futures | Rs. 1,07,000 |
| 2 | Position 1- Buy 1 lot of Nifty futures Position 2- Buy an ATM put option with the same expiry | Rs. 23,500 |
- Futures short positions can be reduced by buying a call option. For example:
| Strategy | Position | Margin Required |
|---|---|---|
| 1 | Position 1- Sell 1 lot of Nifty futures | Rs. 1,07,000 |
| 2 | Position 1- Sell 1 lot of Nifty futures Position 2- Buy an ATM call option with the same expiry | Rs. 23,000 |
- Option short positions can be reduced by buying a corresponding call/put option. For example:
| Strategy | Position | Margin Required |
|---|---|---|
| 1 | Position 1- Sell an ATM call option | Rs. 1,03,000 |
| 2 | Position 1- Sell an ATM put option Position 2- Buy an OTM call option | Rs. 28,000 |
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