The full margin is required when you sell (short) options or execute futures before placing a buy hedge position. However, you can reduce margin requirements by placing the buy option orders before the future or short option orders.
Order sequence matters
- Higher margin approach: Selling options or futures first requires full margin until you place the hedge.
- Lower margin approach: Placing buy option orders before futures or short option orders executes the hedge position with the least margin requirement.
Example scenario
Unhedged position: The required margin to sell Nifty April futures is ₹1,06,899.21.
After hedging: The final margin required after hedging the sell position with a buy position is ₹44,198.38.
Learn more about optimising margin usage at
tradingqna.com/t/benefiting-from-the-new-margin-framework-an-example/80658.