Lined name in Kite Zerodha

I’m unable to seek out any info on margin requirement/pledging of shares for a lined name.

The margin requirement would be the similar as it’s for promoting an possibility. You’ll be able to examine the margin necessities right here or on the order window on Kite.

The margin you obtain from pledging underlying shares will depend upon the haircut worth of the shares. You’ll be able to examine the haircut for all of the securities right here.

Thanks Shubh on your reply.Might you please inform me the process to pledge underlying share so as to execute lined name optionThanks

Hey @apurv_siddharth

You’ll be able to examine on this hyperlink to know the process on Pledging

My data is proscribed. What I see I perceive higher. Nicely I additionally perceive what I’m defined As of as we speak the twentieth of Jan 24 I maintain upwards of 4200 shares of ICICI Financial institution. Having written requires 4200 shares @ 1070 CE Feb at say 15 the CE has jumped to 18.45 and my account reveals a lack of say ~13000 then going by the volatility of CE 1070 if name is effectively, deep within the cash earlier than expiry then how is my underlying defending me ? What if there’s a margin name set off and I maintain pumping cash (unsure about this explicit level) ? Nicely what’s my fairness holding good for ? Why gained’t it’s squared off at supply ? My holdings are in the identical Zerodha account. Why isn’t there an auto cowl with out involving cash. My share is capping my threat how (and upside past 1070) ? Why will I not obtain an task discover or an early task discover (if there’s such a factor in nse – I don’t know) and the settlement is finished robotically – possibility premium + capped upside @1070 (minus my underlying buy worth) x variety of shares.The losses proven as 13000 as we speak and possibly 60000 (or nevertheless excessive the quantity is) in case the underlying is at say 1130 is a unsuitable illustration. If there is no such thing as a task discover from the dealer relayed through alternate then what’s my supposed “lined name” good for ? The mechanism defined by others in response to Mr Bhushan may go effectively for pure choices buying and selling however not for somebody seeking to shield his underlying by possibility / name writing with a margin for revenue baked in case of an upward worth motion. Choice premium linked P&L is choices “Buying and selling” and never a P&L linked to “lined calls”.I’m a learner so please right me if I’m unsuitable. Add to my data.

You’ve talked about some good factors which the OP wasn’t factoring in his posts atleast…

Lined Name is only a technique, alternate and brokerage guidelines usually are not made protecting methods in thoughts however stability of the general system additionally…

For e.g. What if this finances day there’s one other Sitaraman Candle kind bulletins and every thing shoots up 10-20% and the choice greeks/excessive IVs kick in and the Name possibility costs simply sky rocket and one is sitting on an enormous MTM loss way more that the quantity of shares held in account… That’s the place I feel the 50% money collateral requirement is available in in order that the trades/losses might be settled and so forth and so forth.

Zerodha group/specialists pls right me if I’m unsuitable

@Bhushan_Nikhar Any breakthrough right here? @nithin does Zerodha’s product group have this in roadmap to make choices (lined) extra environment friendly? I additionally maintain tons and many inventory however have to have margin for each lined name which is completely inefficient to commerce and is mindless.

So as to add: different brokers are the identical, does nobody perceive lined calls?

@Bhushan_Nikhar Any breakthrough right here? @nithin does Zerodha’s product group have this in roadmap to make choices (lined) extra environment friendly? I additionally maintain tons and many inventory however have to have margin for each lined name which is completely inefficient to commerce and is mindless.

So as to add: different brokers are the identical, does nobody perceive lined calls?

You’ll be able to pledge your similar shares to get upto 50% margin. The nice factor is that in case your lined name will get ITM throughout expiry, your pledged shares shall be delivered to the counterparty, so long as you have got debit instruction appropriately arrange.

Do you imply DDPI enabled or one thing else?

Sure, both DDPI enabled or it’s essential authorize your debits on expiry day in case your lined name expires ITM.

@dcd I’ve {a partially} lined name with Rel (184 shares in demat vs 250 lot measurement). If it expires ITM, will 66 shares be bought or a full lot shall be bought for shortfall?

Hello @aaridrakamanu

As a lot as I’m conscious, your holdings (whether or not pledged or not) will certainly be thought-about to satisfy the bodily supply requirement, and solely the shortfall shall be bought from public sale markets and so forth. However I’ll counsel you to not let it go to public sale (it’s fairly expensive) and buy any remaining shares from the market on expiry day itself simply earlier than 3:30 pm

Nice suggestion, thanks!

Bhushan, you’re 101% right technically. When an individual is holding shares, then why extra margin is required which is round 20% initially and enhance to 40% in previous few days of expiry. And additional as per NSE rule, 50% of margin needs to be money, which suggests in previous few days one want 20% money along with holding, which is absurd and past logic. At current there is no such thing as a distinction in promoting bare name and promoting lined name. There needs to be easy tick choices whereas promoting name that it’s bare or lined and accordingly margin to be utilized or holding to be blocked. For lined name, no margin is required as there is no such thing as a threat as holding is on the market and might be blocked.

OK. One query from what I perceive from the above dialogue. The bought name possibility is handled bare. So, do we have to keep extra margin to compensate MTM losses ?? Let’s say the underlying worth will increase drastically say by 20%, the MTM loss shall be enormous.@ShubhS9 are you able to reply this ?

Hello @Santhosh9

That’s right. As the choice, until it’s exercised, is handled as a unadorned place and would require margin to fund MTM losses.

I wished to share this concept.

There have to be an indicator (“Lined Name”) in Kite so as to choose your current holding for lined calls. For instance, choose 1 lot (150 shares) of LTIM-EQ and the person flags it for a lined name. Identical to with e-dis you’ll be able to mark a inventory on the market. Why not mark a inventory for a lined name?

So long as the “Lined Name” indicator is lively, Kite shouldn’t block extra margin for promoting the lined name possibility.

If the person want to convert the lined name to a unadorned quick name, then they need to keep the required margin and disable the lined name flag. However, it’s unsuitable to penalize traders by treating margin cash for lined calls and that for bare quick calls the identical approach.

Moreover, it appears illogical to maintain feeding margin cash for lined calls in a loopy bull market. I’m conscious of the 50% money part requirement. However, this shouldn’t be wanted when you have already got the inventory holding earlier than promoting the lined name. All of the system wants is a method to flag that the held shares are meant for a lined name in order that no extra margin cash is required.

Ideas?

I fully agree together with your suggestion about implementing a “Lined Name” indicator in Kite. It makes good sense to permit traders to flag their current holdings for lined calls, identical to how e-DIS permits marking a inventory on the market. This is able to streamline the method and get rid of the unfair burden of treating lined calls the identical approach as bare quick calls when it comes to margin necessities.

Lined calls, by nature, are a lot much less dangerous for the reason that investor already holds the underlying inventory, and there’s no justification for blocking extra margin as if it have been a unadorned place. The suggestion of changing a lined name to a unadorned quick name with applicable margin necessities, when the person disables the flag, is sensible and would offer the flexibleness merchants want.

Moreover, comparable logic ought to apply to cash-secured places, notably in risky or crashed markets. Blocking funds for a cash-secured put, when the vendor has ample money or short-term investments to cowl the potential obligation, may shield put sellers from being compelled to liquidate positions unnecessarily. In excessive market circumstances, having such a flag or indicator would guarantee extra environment friendly margin administration and shield sellers from extreme capital being tied up.

This answer may present a extra dynamic and logical margin system, defending each lined name sellers and cash-secured put sellers from undue monetary pressure.