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From 1st of May 2020, the margin required to trade will change as per SEBI Circular SEBI/HO/MRD2/DCAP/CIR/P/2020/27, Dated: February 24, 2020.
Link here: https://www.sebi.gov.in/legal/circulars/feb-2020/review-of-margin-framework-for-cash-and-derivatives-segments-except-for-commodity-derivatives-segment-_46058.html
Here is a snapshot:
Cash market (intraday) – NO CHANGE in margins.
Option Buy (Naked or Hedged) – NO CHANGE in margins.
Option Sell (Naked) – NOT MUCH CHANGE in margins for Index, but for stocks, the margin will increase.
Future Buy/Sell (Naked) – NOT MUCH CHANGE in margins for Index, but for stocks, the margin will increase.
Option Sell (Hedged) – MARGIN CHANGE – Margins will REDUCE by a whopping 60-70%.
Future Buy/Sell (Hedged) – MARGIN CHANGE- Margins will REDUCE form 60 to 21% in BOTH Index & Stocks.
All my strategies of Option & Future are hedged – so in a strategy where 1.6 Lakh is required, the margin required will be reduced to 48,000 only.
This will effectively INCREASE the ROI by a HUGE percentage.
I cannot tell for sure unless I take a trade on reduced margins but here is a guess:
3,500 (approx profit right now on 1.6 Lakh margin per month) / 48,000 (1.6 Lakh margin reduced to 48k for the same trade) * 100 = 7.29%
Which means the ROI (Return On Investment) may increase by 4.29% to 7.29% per month
The picture will be more clear when the new rules come into effect and I start getting feedback from my old clients and I take a couple of trades myself.
Too excited. 🙂
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