For NRML orders, I understand that due to OI restrictions, we can’t buy deep out-of-the-money options first. This means we need to trade the short leg first and then the long leg, which eliminates the margin benefit for the hedge.
For example, if the OI restriction states that the NIFTY range is 22200 to 22800 for NRML orders, but I want to sell the 23000CE and buy the 23050CE:
- In the case of MIS, I can buy the 23050CE first and then sell the 23000CE to get the margin benefit.
My question is: what if I buy the 23050CE MIS first, then sell the 23000CE NRML, and finally convert the 23050CE MIS to NRML?
Will this workaround allow me to obtain the margin benefit?
you can initiate all the trades in mis and then convert it one by one to nrml using convert option. Make sure you change the sell leg first and then buy leg. If you dont have margin to convert all at once, then try with smaller qty
or
do what you have mentioned here. It works
Margin benefit will work only if both the products are the same. Doesnt work if one is in MIS and another is in NRML
Thanks for clarifying @Krishnakumar.
Lets say we are talking about 1 lot. So if naked sell requires 52k as margin whereas buying this with hedge requires 16k margin.
According to you, if we do as you say, what margin am i required to maintain?
You will have to sell first. In Zerodha, you cannot buy otm first.