With the new Peak Margining System for collection of upfront margins kicking in from the 01st of December, it is essential for all of us to understand it with greater clarity.  Check here to understand what is Peak Margin. 


Following are scenarios that can result in Margin Penalties


  1. If you square off long position FIRST while exiting the hedge position in options, the short position will require full margin. We have explained here in detail. 
  2. In the calendar spread strategy, if the ANY position is squared off OR on the expiry date, if the position is not rolled over to the next expiry date, the other leg open position will require a full margin.
  3. Margin requirement is lower when you have hedged positions and  based on which you can take additional positions. Squaring off one leg of the hedged position results in additional margin requirement on the positions taken when the hedged positions were open.
  4. You can benefit from lower margin by placing orders to create hedge positions.  If the order for only one leg of the hedge position gets executed, exchange would require full margin for the same.  Exchanges don’t consider pending orders while calculating the margins, so you need to provide a margin for all fully executed open positions till the pending order if any placed for hedging purposes is executed. 

 

Please be mindful of the above scenarios and provide sufficient margins to avoid penalties in your account.