How is Option Premium calculated when there are multiple trades?
The Options Premium shown under the Funds tab on Kite is the total premium received from shorting/writing options. The Cash margin available is inclusive of this amount, but the breakdown is provided as an option premium.
If you have done multiple trades, the option premium value gets calculated based on the sum of the average price of all the sell orders in the particular contract. Here's an example:
Here is a carried forward long position of 2 lots of “HDFCLIFE21JAN700CE” which was sold the next day, along with which there was also an intraday trade in the same contract. So in total, 4 orders have been executed as per the screenshot below.
The screenshot below shows the Opening balance, Available cash, Used margin, Available margin and Option premium values.
What is the difference between "Used Margin" and "Option Premium" here?
The calculation for Used Margin in this case can be done in two ways:
1. FIFO (First In First Out) method:
The total of 2 carried forward position sold = 63140 [31350 (1100 * 28.50) + 31790 (1100 * 28.90)]
The profit from the intraday trade = 1045 (30.90 - 29.95 * 1100)
Total = 64185
2. Based on the difference between the Premium received and the Premium paid:
Sum of all the sell trades (Premium received) = 97130 [31350(1100 * 28.50) + 31790(1100 * 28.90) + 33990(1100 * 30.90)] -
Sum of all the buy trades (Premium paid) = 32945 (1100 * 29.95)
The difference is the used margin = 64185
This is the actual amount credited to your account.
Calculating the Option premium:
The sell average of all 3 trades = 29.4333 (97130 / 3300)
Two lots have been sold = -64753.33 (2200 * 29.4333)
Do note that the minus (-) sign/symbol shown in the Used margin and Option premium is the amount credited, and not amount debited.
The buy average shown on Kite for an open position is calculated based on all the trades done for the day in the particular contract (carried forward/intraday) or scrip.