Yes, exiting a hedged trade's low-risk leg is a common reason for peak margin shortfall. These shortfalls can occur even if you have closed both legs of a hedged trade.
The clearing corporation (CC) takes eight random snapshots for the commodity segment and four random snapshots for all other segments during the day to determine whether you have sufficient margins available during those snapshots. If you do not have sufficient margins either at the end of the trading day or in the intraday snapshots, the exchange charges a margin penalty on the net shortfall amount. The penalty is 0.5% of the shortfall amount for amounts lower than ₹1 lakh and 1% for amounts higher than ₹1 lakh. This can go up to 5% if you have a shortfall for more than three instances in a month. A peak margin shortfall can occur if the CC takes a snapshot when you have closed one leg of the trade and the other is yet to be closed.
Example scenario
- You transfer ₹2,00,000 to your trading account and take a NIFTY long position in the April contract. The margin blocked is ₹1,60,000.
- You take a NIFTY short position in the May contract. The margin blocked is now ₹30,000 (because your position is currently hedged; free balance in your account: ₹1,70,000).
- You take a BANKNIFTY long position in the April contract. The margin blocked is ₹1,60,000.
- You have fulfilled all margin requirements.
- You now close the first leg of your NIFTY position (long April), which causes the total margin required in your account to go up to ₹3,20,000.
- The system raises an alert and informs you of short margins. NSE takes a snapshot of your position at this instance and captures ₹3,20,000 as the margin required.
- You receive the alert and close the other leg of NIFTY, which reduces the required margin to ₹1,60,000 (since only your BANKNIFTY position is open).
A peak margin shortfall occurs even though you have squared off your outstanding positions and complied with the margin requirements on an end-of-day basis. In such a case, the exchange will pass the margin penalty on to you.
A brokerage of ₹40 per executed order will be charged instead of ₹20 when you place an F&O order if your account has a negative balance.