Options Trading

How is margin (premium) calculated on Buy Market orders in Option Contracts?

Buy orders irrespective of whether it is a Call or a Put, is margined only to the extent of the Premium payable on the order. In case of market order, I-Sec system blocks margin on the basis of Best five BID and ASK order prices available in the exchange. However the BID and ASK prices are subject to change anytime and hence there can be difference in the price prevailing in the exchange at the time of order placement and the price at which order gets executed. For e.g. If you place a Buy Market order in OPT-ACC-30-May-2002-150-PE for 1500 quantity and likely execution rate based on ASK prices available in market at that point of time is Rs 20, then margin will be blocked at order placement would be Rs 30000 (1500 * Rs. 20). However, since ASK and BID prices are subject to change anytime, hence the execution of the order may happen at different price (say Rs. 22). Post execution, system would re-block differential margin based on actual execution price. If the differential margin based on actual execution price is not available in the limit allocation, then limit will become negative to that extent. In above example margin would be Rs 33,000 (1500*Rs 22). If sufficient free limit is not available in limit allocation then F&O limit will be negative to the tune of Rs. 3000.