Why is higher than usual margin blocked for my F&O trades close to expiry?
As Futures and Options (F&O) contracts near their expiry date and approach physical delivery, the margins required for these contracts are increased in proportion to the contract value. This is because physical settlement requires the actual delivery of the underlying stock. Therefore, higher margins are blocked for F&O trades as they get closer to their expiry date.
Margins blocked for F&O trades increase:
- Four days before expiry (previous week Friday to expiry day) in case of open in-the-money(ITM) long options positions.
- On the expiry day, if any open future or short option positions are required to be physically settled. To learn more, see What is Zerodha's policy on the physical settlement of equity derivatives on expiry?
Increased margin requirements can be checked on the margin calculator (WEB) or the Kite order window, as displayed below: