Can I buy options using collateral margin?

You can now buy options using collateral margin on Zerodha by pledging your holdings as collateral, a feature previously limited to equity intraday, selling options, and futures trading.

When you use collateral margin for option buying, Delayed Payment Charges (DPC) of 0.05% per day (₹50 per lakh) or 18% per annum apply only to overnight positions. DPC is charged only on the collateral amount utilised for option buying, not the entire option purchase amount.

You can utilise up to 100% of your collateral value for option buying. If you utilise 100% collateral, DPC applies to the full collateral amount when positions are carried forward to the next day. No DPC applies to intraday positions that are closed on the same day.

Example scenario

1. You have ₹1 lakh collateral margin from pledging holdings in your account.
2. On Monday, you buy options worth ₹2 lakh in total₹40,000 (20%) using collateral margin and ₹1.6 lakh using cash from your Zerodha account.
3. Since you carry these positions overnight, a DPC of 0.05% applies only to the ₹40,000 collateral utilised amount, which is equal ₹20 per day.
4. On Friday, you exit the position.
5. Total DPC for 4 days (Tuesday to Friday) = ₹20 × 4 = ₹80
6. No DPC is charged on the ₹1.6 lakh funded by cash.

You can check the approved list of securities for pledging to see which instruments are eligible and their specific haircut percentages.

If your account has a debit balance for four consecutive trading days, you will not be allowed to buy options using collateral margin from the fifth trading day. For example, if you trade on Monday and the debit remains through Thursday, you cannot buy options with margin from Friday onwards until you clear the negative balance.

Things to keep in mind

• You must maintain sufficient funds in your Zerodha account to cover any losses. Without enough funds, you'll need to deposit money, or the position might be squared off, or the pledged stock will be sold at RMS' discretion.
• If the value of your pledged stocks drops, your available margin will also drop. Positions can be squared off to cover any debit balance.
• The cost to pledge is ₹30 + GST for each stock type, regardless of quantity. There are no charges for unpledging.