Why has the margin requirement increased for naked futures and option shorts?
The margin requirement framework has been modified by NSE w.e.f June 1st, 2020. Price scan range (PSR) which is used to determine F&O margins has been changed such that when markets are volatile, the margin required for naked positions will be higher.
Higher PSR also means that going forward margins will change gradually instead of suddenly spiking. You can check the new margin requirements on our updated F&O margin calculator.
If you held open positions at the end of day Friday, 29th May, your margin requirement will change on June 1st on Kite. If you have any naked positions, the margin required will go up and you’d be required to add funds to maintain this additional margin to avoid positions being squared off. If you have hedged positions, the margin will reduce. Learn more about the margin benefit in this tradingQ&A post.
You can check this Zconnect blogpost for more details and an illustration on the reduced margin requirement for hedged positions. You can also check this presentation from NSE for more information.