SEBI review of margin framework which got Effective from today to bring down margin requirements for traders in the futures and options (F&O) segment. SEBI want to control risk of breaking down the system and hence is rewarding traders who play with Hedge. Margins on Hedged Futures and Options Strategies where the trading risk is limited are likely to be reduced by 60-75%
You can read more in the NSE presentation here https://bit.ly/3gEA9u5 25
Here are the key points:
- For Trading in Futures Margin has Increased by Around 34%. Previous margin was around 1 Lakh now its have increased to 1.34 Lakh
- Buying Futures and Hedging with a Put your Margin has come down almost 77% So I can carry an Overnight Position in Nifty Future and 9800 PE at just 30K.
- There is a reduction in the margin for Strangles as well in tune to 1.15 Lakh Below example we have chose 9800 CE AND PE Short.
- For a Bear Spread Option Strategy Trader can carry position with just 22K Margin. In Below Example we have take a Short in 9800 CE and Buy in 9900 CE
- Similar Reduction is Seen for a Iron Condor and Calendar Spread Options Also.
NSE and SEBI New Margin Requirement will help reduce the risk in the system, But with reduction in margin Traders might go for More Leverage and can increase there Risk of Ruin.
Always Remember there are no Free Lunches, Discipline,Risk Management and Right Position Size will only help you to make money on Consistent Basis.