Options Trading

What is the Basis of MTM in case of Sell Put and what happens in the MTM process?

As soon as you place a Sell Put order, which results in a position, a Trigger price is calculated (as per the formula given below) which is displayed in the Open positions book. Whenever the Underlying price of the shares goes below the Trigger price in case of Sell Put, the Contract would be in the MTM loop. First the Additional margin recalculated as per the new scenario due to price fall is blocked; if Additional margin is found to be insufficient then the orders in the same contract are cancelled. If both these measures fail, then the position is squared off by the ICICIdirect.com. Trigger Price for Sell Put position = (Strike Price - Margin Amount) - (1 - Minimum Margin %)   For Example: You have a sell position in OPT-ACC-30-May-2002-150-PE Current Market price of ACC is 160. Initial margin on ACC is 30%. Minimum Margin on ACC is 10%. Initial Margin = (160*30% - (160-150)) = Rs 38 Minimum Margin on ACC is 10%. Trigger Price for Sell Put Position = (150 - 38) / (1- 10%) = 124.44 Please note - Exchange has identified option contracts in either Deep Out of The Money (OTM) or Non Deep OTM for which Exchange has stipulated separate Exposure percentage (also known as Extreme loss margin percentage). Hence accordingly for Deep OTM or Non Deep OTM option contracts Initial Margin percentage and Minimum Margin percentage would be revised accordingly.

Please Note: Mark to Market (MTM) is only for futures, it  is a process of revaluing your open futures contracts at the end of each trading day to determine the profit or loss that has occurred due to changes in the price of the underlying asset. This is not for options.