At Groww, we want your trading experience to be smooth and stress-free. If your Futures and Options (FnO) positions ever get squared off (automatically closed), we understand that it can be frustrating. However, this is done to protect your funds, manage risk, and comply with exchange regulations.
To help you stay prepared, let’s go over why Groww might square off your FnO positions—and how you can avoid it.
If you hold a hedged position (where one trade offsets the risk of another), the margin required is lower. But if you exit one leg of the hedge, the risk increases, and so does the margin requirement (SPAN margin).
If your account does not have sufficient funds to meet the extra required margin, a margin shortfall occurs. Positions are squared off to reduce the margin requirement and clear the shortfall
✔ Close the position with the higher margin first
✔ Use exit all to close hedged positions together
✔ Keep extra funds in your account to handle margin increases.
✔ Pledge your stock holdings to get additional trading margin at no extra cost.
When you enter a trade, an initial margin is blocked from the account as per the requirements at that time.
To maintain the positions, you are required to maintain margin requirements at all times. Margin requirement changes based on market fluctuations. The exchange updates margin requirements based on market conditions multiple times in a day.
If the required margin increases and your account doesn’t have enough balance, a shortfall can occur. And to clear this shortfall, Groww may square off your position.
✔ Keep a margin buffer (extra funds) in your trading account.
✔ Pledge your stock holdings to get additional trading margin at no extra cost.
✔ Keep track of your margin requirement and available funds through the Groww balance section
Groww has a risk management system in place to protect traders from extreme losses. If your Mark-to-Market (MTM) losses reach 80% of your available funds, your position might be squared off to prevent further losses.
How to Avoid This?
✔ Set stop-loss orders to limit potential losses.
✔ Monitor your MTM loss regularly and add sufficient funds if needed.
As stock FnO contracts are physically settled, exchanges start applying physical delivery margins on ITM (In the money) stock options contracts from four days before expiry. This margin requirement keeps increasing as expiry approaches.
When you take an OTM (out of the money) stock option contract, only the option premium margin is blocked. However, if the contract becomes ITM, an additional margin is required. If your account lacks sufficient funds to cover this additional requirement, Groww squares off the position to prevent margin shortfall.
During the expiry week, keep additional funds along with the premium margin in your Groww account to account for the physical delivery margin requirement.
Learn more about physical delivery margin requirements here.
At Groww, auto-square-offs are a last resort to shield you from heavy losses or penalties. By staying alert to margins, losses, and expiry rules, you can trade smoothly.
Need help? Chat with us on the Groww app—we’re here 24/7!
Disclaimer: Margins and regulations are subject to exchange guidelines. Prices and examples are illustrative.
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