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How much money is required to buy/sell options?

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The money you need for options trading depends on whether you're buying or selling an option and your existing positions.

Buying an Option (Long Call or Long Put):
  • When you buy an option, your maximum potential loss is the premium you pay.
  • The upfront cost is the total premium of the option contract.
  • Calculation: Quantity (Lot Size) × Premium per share/unit
  • Example: If the NIFTY option premium is ₹100 and the lot size is 25, you need ₹100 × 25 = ₹2,500 to buy one lot.
Selling an Option (Short Call or Short Put):
  • Selling an option means you receive the premium upfront, but your potential loss can be unlimited.
  • Due to this risk, selling options requires a margin with the exchange.
  • The margin required is dynamic and includes:
  • SPAN Margin: Minimum margin required by the exchange.
  • Exposure Margin (ELM): Additional margin for potential losses.
  • Additional Margin: May be required based on market conditions.
  • Premium Amount Received: Offsets some of your margin requirement.
  • General Calculation: SPAN Margin + Exposure Margin + Any Additional Margin - Premium Amount Received
  • Example: If a Bank NIFTY option requires a SPAN + Exposure margin of ₹1,00,000 and you receive a premium of ₹5,000, you need approximately ₹95,000 in your account.
Important Considerations:
  • Regulatory Charges & Brokerage: Account for charges like STT, Transaction Charges, GST, and Groww's brokerage (₹20 per executed order for F&O).
  • Groww's Margin Calculator: Use it for precise margin requirements.
  • Physical Delivery Margins: Applicable for In-The-Money (ITM) stock options held until expiry. Ensure you have enough funds to avoid automatic square-off or penalties.
Understanding these requirements is crucial for managing your capital efficiently in F&O trading.
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