How to determine the margin for hedge positions?

When dealing with hedge positions, understanding the margin requirements is crucial for efficient trade execution and risk management. Here's a detailed guide on how to determine the margin for hedge positions:

Suppose you have selected the following options for a hedge position:

1. Sell (Short) ITM Put Option: NIFTY 22600 PE
2. Buy (Long) OTM Put Option: NIFTY 22500 PE
   

The margin required for this strategy consists of span margin and exposure margin. The span margin is the amount required to cover potential losses based on price changes, while the exposure margin covers additional risks.

The margin required for the 22600 PE is ₹70,149.92. However, by hedging with the 22500 PE buy, the total amount required to short the 22600 PE is reduced to just ₹14,995.92.

Note: The margin for the hedge position shown in the image does not include the buy margin. Please add the buy margin to the margin shown in the image to get the accurate total margin requirement.

To avoid order rejections due to insufficient margin, always execute the buy order first. Additionally, our Basket Order facility will help you determine the margin required seamlessly, ensuring efficient trade execution. To know more, kindly refer to this article.

• Related Articles

• How to efficiently square-off order-level hedge positions?

  While squaring off your hedge position you are required to close the Sell order first of the option before squaring off the Buy order. When dealing with hedged positions such as a Bull Put Spread, it is vital to square off orders in a manner that ...

• How do I determine the margin blocked for futures trading?

  The margin blocked is contingent on the specific scrip. For detailed information on particular scrips, you can check the margin requirements in our Margin Calculator.

• How do I respond to an increased margin requirement?

  Should the margin requirement rise, it becomes imperative for investors to allocate additional funds for their open positions. Failure to do so may result in the position being squared off.

• Can I continue my intraday futures positions beyond the day?

  Absolutely! You can extend your intraday futures position to an overnight position by using the 'Convert' option found under the 'Positions' Tab on the Account Manager. There will not be any additional margin required to convert the position. ...

• What to do in case of a margin shortfall at FYERS?

  If you encounter a margin shortfall while trading futures at FYERS, you should promptly deposit funds to cover the gap. This action will help you meet the minimum margin requirements and maintain your positions. Steps to take: Check Margin ...