What is Margin Used in Zerodha Kite | Details, Charges

Arbitrage opportunities in options - how options are priced, explained in layman's terms - without resorting to the BS pricing model

Arbitrage opportunities in options - how options are priced, explained in layman's terms - without resorting to the BS pricing model
Alright retards, I've been laid off at work due to beervirus and I've been eyeing and toying with the idea to get back into options trading. I'm writing this post to raise the bar for discussion on this sub, I'm tired of seeing just memes. We'll never match WSB unless there is a healthy mix of dankass memes and geniass discussions.
Now, when it comes to options, I am completely self-taught (completely from first principles, back in 2008, before you autists came up with the idea of watching videos on youtube). Since I am completely self-taught, my perspective will be different from the people who learnt this stuff while studying MBA/finance courses/NSE accredited investing courses. So if what I'm saying is different from what you've heard from the dude who swindled you of 20K for two days of options education or your gay BF's live-in partner, remember when it comes to maths, there are many ways of approaching a problem, ultimately, all are the same - profit means account balance goes up, loss means a loss post on ISB goes up.
Now, I'm assuming that you understand how options work. If not, I suggest heading to Zerodha's Varsity to read up on options. If you're too lazy for this, get your micro-dick outta options, this is a man's game, surprise butt-sex awaits amateurs.
I'm also assuming that you've come to realise that the sustainable way to make money in options is to write options. Unless you've got Trump or Ambani on speed dial to get access to news before it becomes news, YOLOing whatever rent money you have on buying options will blow up your account, eventually.
Writing options also means the possibility of account balance going tits up is a real possibility. You gotta, gotta, gotta measure and manage your risk. You can do this only when you understand options as well as your dick.
Towards this, I intend to put up a bunch of posts (depending on many of you shit heads are still reading at this point) that comment about little things that are more of 'wisdom' than 'education'.
The example below talks about currency derivatives. Why currency? Read below:
  • Lower margin needed. I can short a CE/PE contract with only Rs.2000, unlike the >Rs. 70,000 for index contracts. You get to learn, play and wisen up with an order of magnitude less money than with Nifty or Banknifty contracts.
  • More stable underlying. When you're shorting contracts, the last thing you want is the underlying asset going crazy like a broncho during rodeo.
  • Less autistic crowd in the currency market. While banknifty options attract retards like flies to poop, currency derivatives attract a more educated crowd.
  • Sooner or later, you end up acquiring a more balanced education on economics as a whole, rather than the shit fest that goes on in the local circles.
  • The more contracts you can short, the more strategies you can pursue
  • Decent hedging is possible without throwing away all of your potential profits
  • Lesser stress (anybody else going through premature hairloss or is it just me?) because of points outlined above.
Alright, today, I'm going point how the put-call parity works and by extension, show proof for 'efficient markets' by pointing out how opportunities for arbitrage is pretty much non existent, so you guys can cool it with the whole 'market manipulators' knee jerk reaction.
Alright, to start off, here's the current spot rate of the USD-INR pair:
https://preview.redd.it/qup28ay567j51.jpg?width=452&format=pjpg&auto=webp&s=b79ef1a3480e5cbafa42547143c651397ec57f13
Here's today's USD-INR futures closing rate for Sep expiry:
https://preview.redd.it/krghirc677j51.jpg?width=511&format=pjpg&auto=webp&s=60d52b785baa8a1cd240d0df7949a48c8391ba2d
The difference between spot and futures rates is due to differences in what is construed as 'risk-free' interest rates in the US and in India. Check out this video if you want to understand why the Sep futures is trading at a premium of 27 paisa to the spot rate.
Alright, so the deal is, if you buy 1 futures contract @ 74.49, unless the USDINR exchange rate rises by 27 paisa at the end of Sep (i.e. a spot rate of 74.49) you won't make a profit (ignoring brokerage and stuff). If the exchange rate were to remain the same without any change, you stand to lose (0.27 * 1000, currency derivatives have a lot size of 1000) Rs. 270 per lot. Even worse if the rupee were to appreciate (i.e. exchange spot rate goes down).
Now bear with me if the next few paras are exceedingly boorish, I need to spoon feed people who aren't used to currency derivatives. My strategies are mostly aimed at playing a more risk balanced play, something that yields consistent returns which can be compounded. 10% profit compounded monthly gives 314% growth per year, 3.5% profit compounded weekly gives ~600% growth per year.
Given how the USDINR rate is crashing, one way to profit would be to short a futures contract (duh!).
The orange line indicates the current USDINR exchange rate
As indicated above, if the exchange rate does nothing and remains as is till end of Sep, each lot of USDINR futures shorted yields about Rs. 250 in profit (for something that takes up Rs.3000 in margin, that's a >8% profit in return). Things look even better if the exchange rate were to fall further.
The problem is that things heat up quickly if the exchange rate were to go up. Ideally we would want to hedge against it (which also reduces the margin needed drastically). One way to hedge it would be to buy a at-the-money call (74.25CE @ rate of Rs. 0.555 -> Rs. 555 per lot (i.e 0.555*1000)).
https://preview.redd.it/ze16kyphv7j51.jpg?width=588&format=pjpg&auto=webp&s=a3c2bba9fb314beff309671f03a013e69e08f4e0
Having purchased a call option, the P/L curve now looks like:
The max loss is now limited to Rs. 315
The keen-eyed among you will recognise the above P/L curve as one that matches that of a put option. By shorting a futures contract and buying a call option (both with same expiry), we have created a synthetic put option that would have costed us Rs. 315 (0.315*1000) for one lot.
Now, why go through all of this hassle if we can get the same returns by just buying a put option? Makes sense, as long as we can purchase the 74.25 strike put option at a price lesser than Rs. 0.315 (see above).
Let's see what the put options are going for:
Well, how about that...
The market price of 74.25 puts are exactly the same price as our synthetic put. While the synthetic put came in at Rs. 0.315, the put costs another 0.005 extra to avoid the trouble of shorting a futures contract and buying a call at the same time. This is not by chance, big trading desks have algos (trading bots for the virgins here) that keep an eye out for price disparities. In this case, if someone were to be willing to pay more, the algos would compete amongst themselves to sell the puts at any price above 0.32. And if someone were to be willing to sell a put for less than 0.315, the algos would immediately buy.
The price of the puts move in sync with the prices of the futures and call contracts. Conversely, we can create a synthetic call, and you will notice that the price of the synthetic call works out to be the same as the market price for the 74.25 strike call. We can also create a synthetic futures contract the same way.
The prices of derivatives aren't decided willy-nilly. They are precisely calculated at all times, which forms the basis for the best bid/ask prices. There is no room left for someone to come in and make free money via arbitraging using synthetic contracts.
If you found this insightful, and would like more of this sort of posts, let me know.
Options when used properly, can be used to generate risk adjusted returns that are commensurate with the amount of risk you are taking. If you are YOLO-ing, sure, you can double or triple your money, because you can also lose 100% of your margin. Conversely, you can aim for small, steady returns and compound the crap out of them. Play the long game, don't be penny wise and pound foolish.
submitted by circuit_brain to IndianStreetBets [link] [comments]

Can anyone explain Zerodha's physical delivery settlement bs?

I have recently decided to start options trading. I know that SEBI changed the rules from cash-settled to physically-settled last year. But what I don't know is how this is done. And Zerodha's explanation just complicates it further
Please clarify and help out a noob
submitted by rarelygiveshits to IndianStreetBets [link] [comments]

How I Learnt Trading & Investing- My Journey.

I often get asked about how I learnt investing at such a young age. I mentioned a brief overview of how I got into investing and learned the tactics. Here’s the story.
The Idea.
I was 14 years old kid eager to make money. My mom gave me an idea of investing in stocks. It seemed to be practical but I knew nothing about it. Later I asked my mom and dad. They knew very little. I called my aunt who trades every day for the last decade. She told me stuff but it didn’t help either.
The Hustle.
I started watching YouTube videos and read articles of investopedia. I understood nothing. It seemed like rocket science. I then bought a book called the intelligent investor.
This book was for pros. I couldn’t read past a couple of pages. A month passed I was still on square one. I heard stuff like sensex, P/E, index, ROIC but I had no idea what they meant.
Next, I watched YouTube videos on particular terms. I watched a video on what sensex means. What was a stock. How it works. Watching animated videos were quite helpful. I knew something.
A few weeks passed I opened a virtual account on Stock trainer and traded a little. I watched CNBC everyday after I came home from school. Soon I knew the basic ticker symbols. And that’s how I learnt investing, at least the basics.
The First Experience.
In August I had the basic knowledge about stocks through YouTube. But I had no idea how to open a demat account and all. My mom opened it under her name through Icici Bank. Finally, on 6th September I bought my first stock. Coal India x1.
I bought and sold random stocks. I mostly made losses. Over time I learned what fundamental analysis was. I watched animated videos on it.
I soon selected stocks on the basis of P/E ratio, profit and sales growth. It didn’t work. I lost big on TATA Motors.
Then finally I read my first book on stocks. It was called Rule #1. I had to read it 2-3 times to understand. It took me a month to read it.
In August 2018, about a year later I saw a video on technical analysis. I never tried to understand it. I watched it. It was about 1.5hrs long. I was amazed to see how one can predict stock direction based on charts.
Over the course of a few months watched over a 100 videos on YouTube about tech analysis since then. I loved the concept of margin. I came home early after my exam and bought my first stock on leverage.
The Downfall.
It was Infibeam Avenue. I shorted it. I made more money in half an hour than I had made in the entire year.
I was soon addicted. Everyday after writing my exam paper I traded instead of studying for the next paper. Soon my exams were over. I had no time. I had to learn how to swing trade. I spent time analysing charts to figure out my next swing position.
Again I lost a ton of money. I knew I had to scale back. So I set aside a small capital for trading. April 2019, I opened an account on Zerodha as the Icici brokerage was too much.
Over the course I read books like- the intelligent Investor, Stock to riches, how to make money in stocks, how I made over 2 million dollars in the stock market and many more.
So videos and books helped me learn more about stock market more than anything. The simplest way to start is just fucking start. If you’ve no idea what to do, just start. Search. Read. That’s how I learnt investing.
The Sharing.
In March of 2019 I decided to write a short blog on investing on a website called Quora. I was surprised to see the organic reach of my blog. Within hours I got over a thousand views. This encouraged me to write more. Over the course of a year, I ended up writing 450 short blogs on investing on Quora and a couple of books.
In July of 2019 I decided to write a book on my experiences. I brainstormed the ideas and after 72 hours of writing and editing, my first draft was ready. I had no idea on how to publish it. After a few more hours of research and designing the cover I finally published it.
After a few months I wasn’t satisfied with my book. It was only written for beginners. I decided to write something detailed for people who have decent amount of experience in investing. So, 15 days and 400 pages later I finished writing it.
It did pretty good. I got over 5000 downloads. It's free (not trying to promote).
The Pandemic.
The pandemic was a great opportunity to learn more. I'd been watching hundreds of YouTube videos (I got 1k+ offline vids lol).
And I learned more about deeper concepts. Like I'm currently learning about option chain and other forms of data analysis.
The Bottom Line.
At first I made a ton of silly mistakes. I lost money. But I kept learning and recently I started making profits consistently.
It's not a rags to riches story, but it's something most people will go through. I'm no guru or expert, I'm just a guy trying to document his journey.
"The more I learn, the most I realise how much I don't know". - Socrates (or some other old guy).
-Vikrant C.
If you read all that, hats off to you. It was extremely long (and probably not that interesting).
submitted by Vikrantc2003 to Daytrading [link] [comments]

Indian Stock options suck

It wouldn't come as a surprise to people who have been trading options for long time but Indian stock options suck. Prices don't account for fast moving prices.
On Lupin I initiated the trade on Friday. The idea was 950 will act as a resistance. Now I can understand what happened today. Pharma going up and all that. But the option pricing on Friday for 950 was very illiquid and didn't account for such volatility. Not to mention that even when I tried exiting the trade Zerodha kept telling me that even ATM option was illiquid so I needed to use limit orders instead of market orders to get out. I hit the bids and offers and got out of the trade.
Something similar happened on Pidilite. The trade was initiated on 8th. With 1400 acting as resistance. The company revenue was shit but the price has rallied more than 100rs. And the OTM option prices didn't account for such volatility.
Now I could've hypothetically saved the position by initiating short PE trades (aka PR Sundar's Infosys saving mode) or turned it around into a long trade (my method). The problem was that I didn't have extra margin. And I was unwilling to save the positions. Ended up with ~60k loss.
So my two learning from this experience are:
  1. Stock options are illiquid. At one point during these trades I was wondering if I will be able to get out at a good price even at expiry. I mean lets say if I sold an option at say Rs. 12. And on expiry the option is now OTM. And all the offers for the OTM are like Rs.2/3 then I'd be paying a premium of 2/3 rs just to avoid delivering the stocks. In my opinion that is not worth it. Especially considering I can get out of index options at 10/20 paise.
  2. The amount of margin to save (trade) stock option is insane. PR Sundar says it requires 1 crore. And in spite of the hate he generates on this sub, I think he is correct on that one.
I am poor. So I am going to stick to index options.
submitted by level6-killjoy to IndianStreetBets [link] [comments]

Zerodha vs Upstox comparison from the perspective of a daytrader.

I already posted this on indiainvestments but I'm going to post it here too because I'm not sure if my post is going to get approved by the mods there.
Every once in a while a discussion pops up on this sub about which is better, zerodha or upstox, and many of the replies are usually from investors or swing traders. As a daytrader who's used them both for almost an year, I just want to share my thoughts on this because it might be useful for someone looking this up in the future.
In my personal opinion, zerodha is, by far, the better choice. Not because zerodha is amazing, but because upstox is terrible. Here's why:
This post ended up becoming quite longer than I expected but hopefully it will warn new users to stay away upstox unless they get their shit together but I highly doubt it's ever going to happen. Zerodha has it's flaws too but it's quite decent in my opinion and definitely the best discount broker in India. At least their customer care isn't stupid and can answer some technical questions instead of knowing literally nothing except the account-opening process.
submitted by kavinsky72 to IndianStreetBets [link] [comments]

Can anyone explain Zerodha's physical delivery settlement for derivatives?

I have recently decided to start options trading. I know that SEBI changed the rules from cash-settled to physically-settled last year. But what I don't know is how this is done. And Zerodha's explanation just complicates it further
Please clarify and help out a noob
submitted by rarelygiveshits to IndiaInvestments [link] [comments]

Why I trade futures over options

Hello autists.
I thought I shall share some tips on why I trade futures instead of options. If it is not your cup of tea, feel free to ignore this. After all, everybody's risk appetite is different. Tailor it to your Personal Risk Tolerance.
Note: I am not a financial advisor. These are my ideas alone and anyone looking to go through with this must consult their advisor.
Before i get started, I should warn newbies that it is not advisable to start off with futures. I have been doing this for 2 years now, starting off with 2L and saved up my salary every month to put it in my account. I realized that Mutual Funds were managed by tards and I do not want to enjoy a yatch when i am 60. But before all this, I started off with conventional stocks and slowly dipped my feet into futures.
Pre-requisites: 1. Some understanding of your emotional levels (do you immediately square off your position if things are not looking good, or do you wait for it to play out? ) 2. Do you have a trade setup you trust? Do you keep a log of how it performs and how it does in a bull or bear market? 3. Is the money in your trading account something you can afford to lose? If not, save up more and come back.
Futures: I shall not get into the details of what futures are, and why it was started in the commodity business. Basically, for brevity, the equity futures go by lot size. For example, Reliance has a lot size of 500. If reliance is trading at 1000, the margin given by zerodha is Rs. 2,00,000 approx to hold these shares overnight. For intraday, you need a margin of ~1Lakh.
Imagine, if you wanted to buy the same amount of shares you would need an account size of Rs. 5L. Now, with great power comes great responsibility. Lets say, there is a huge oil fight and oil prices drop. The price of reliance drops 20% to 800. If you had bought the shares, your account size also drops 20% to 4L. But if you had bought futures, your account size of 2Lakhs now loses 1Lakh, which is a 50% loss. The plus side is, you can also make the same if you are right.
Now why do i trade futures instead of options:
Lets say my account size is 2.5 Lakhs, and I want to buy reliance and hold it overnight. 1. 2 lakhs is taken up for my margin, and i have a balance of 50k. If the next day, reliance goes up by Rs.20. I would have made a profit of Rs. 10000 (500x20). Now if i by the end of the night, my account size becomes 2.6Lakhs. That is i can use the full 2.6L margin now.
This is very important for me. These profits are already realized in your account. And this is called Mark to Market (MTM). Note: in options, the profits you make are unrealized. They are sitting in your account until you square it off.
  1. If i were to buy the same amount in shares (for 2 lakhs). The next day, i can only trade with 50k in my account. The 2 lakhs do not show up until i square off. But when i am holding futures, and the next trading day starts, I convert my overnight positions to intraday, thus saving up 50% of the margin. When things dont go my way, I immediately square off and use the full margin for my next trade.
  2. If you are buying options, you need to be right about the direction of price movement AND the time it would get there (also called as delta and theta). Implied volatility also comes into play, meaning, when a herd of people are betting the same, you will still lose if you are with the herd. In futures, you only have to be right about the direction.
  3. You ever get a thrill when the VIX is sky high? with so much volatility you profits keep shooting up and your losses are devastating at the same time? Do you enjoy that feeling? Then fuck it, you have a gambling addiction. But, thats how i feel like trading future. Even in a low volatility environment my losses can wipe away 10% of my account in a single trade. Know yourself first.
Hope this helped a few autists.
Good luck trading.
Current positions: https://imgur.com/a/arBO6RT
Tldr: if you can't read this, stick to yoloing options
submitted by Justatadcurious99 to IndianStreetBets [link] [comments]

Rant on certain questions asked in the trading community

There are certain questions that get repeated in the trading community
What is the capital required? Capital deployed?
These questions make 0 sense and serve no purpose.
Eg: If i make 1 lac and i share the screenshot. And i caption it on twitter as "Look I had 20k in my zerodha account before the day started , and now it is 1 lac" PAISA 5x ho gaya.
That invites a lot of attention. But let's break this further.
The importance of risk management:
Maximum traders are trading with a risk of 1-2% of TOTAL capital. That means if their capital is 1lac, they are risking close to 1-2% of overall capital.
Maximum traders trade with a risk:reward of 1:1, 1:2, 1:3 (proper autists only)
That means they are risking 1000rs to make 1000rs reward . Risk to reward=1:1 (RR=1:1)
Now. Let's go back to my first retarded example. "I MADE 1 LAC WITH 20K. LOOK AT MY ZERODHA BALANCE"
Now, to make 1 lac I would be risking say 1 lac. RR=1:1 To risk 1 lac i would have to have a capital of 1crore (assuming i trade at 1% risk per trade)
Cool?
Now maximum traders have funds in various accounts- equity account , commodity accounts , and with some other brokers, just in case to prevent random buttfucking from a broker.
So, if you see a profit screenshot, STOP asking "What is the capital required" That doesn't make sense. The person could be trading with 50x margin. It does not make sense.
The only logical question that makes sense is: 1.On average what kind of Risk:Reward are you playing with? 2. How much of your total capital do you risk per trade?
It's all probabilities With 1% risk per trade you get to YOLO 100 times before you lose everything With 2% risk per trade you get to YOLO 50 times before you lose everything
With 5% risk per trade you get to YOLO 20 times before you lose everything
With 10% risk, just don't .STOP.
submitted by grilledburger to IndianStreetBets [link] [comments]

Few questions coming for a cryptocurency trader.

Hi, Iam from cryptocurrency trading futures and spot trading, i know a bit about analysis, ta and fa..iam new but iam not completely oblivious. I know these questions might be seem too stupid for you to answer..but hey, any help is appreciated.
How does futures and options market work in India, what are the differences between both ? which do you prefer? which is the one where you can bail out of the contract by selling ? (in bitcoin the contract is perpetual and be closed at anytime)
  1. How much capital do i need to start trading, are there size limits of lots?..is adding margin or leverage possible in futures/options?
  2. Is zerodha an ok broker for futures/options trading?
  3. Do the futures/options on equities have a different ticker on exchange..does it have a prefix/suffix?
  4. What broker can you use for forex trading ?
  5. Do these calls/puts differ from longs/short ?
submitted by Gunpowderandcrack to IndianStreetBets [link] [comments]

F &O total turnover while filing ITR.

Can someone help me understand what's the turnover we need to declare while filing ITR? I understand we have to do audit if turnover is above 2Cr but my issue is in calculating the turnover. I use Zerodha and when I check the P&L report for the year 2019-20, I can see they have mentioned total turnover in the beginning of the F&O tab. But that seems way too less, or my understanding of turnover wrong? My total turnover over is showing around 1.5L even though I had bought two lots of Nifty Futures (150 shares) using their margins which itself would come around 18L and several such trades using f&o margins. Is it because the margins are not included while calculating the turnover?
submitted by Vivek_Gooner to IndiaInvestments [link] [comments]

[LIVE] Zerodha Margin Leverage Up To 20X Times - TRADING ... What is Margin Used and Margin Available in Zerodha Margin required to trading in Zerodha - YouTube Best update in zerodha margin tradingvery useful for the day traders How to use collateral margin in Zerodha?

Zerodha Margin Exposure or Leverage facility allows customers to trade many times over the funds available in their account. Zerodha offers margin exposure only on intraday trades.There is no margin facility on delivery trades.Zerodha intraday trade margins are as high as 20 times the funds available in the account. Margin reporting and margin penalty GTT When it comes to funds in your trading platform, the total account value is the closing balance of the previous day's ledger, brought forward. Zerodha Short Selling Margin. The margin account is established with the minimum equity commitment equal to the amount set by Zerodha.. After the minimum amount is set, make sure that the short stock have 100% of short sale plus 50% short sale value in the margin account. In simple words, it is the total amount available in your Zerodha Account. The Margin Available is the total amount of margin that you can use for that particular trade day. This is the amount you can use for trading. Margin Used denotes the amount/margin that you have already used in your As per SEBI regulations, margin shortfall penalty is levied on overnight positions held in the trading account without sufficient margin (SPAN & Exposure (initial margins), net buy premium, physical delivery margins and marked to market losses (if applicable)) as prescribed by the exchange.The margin penalty is levied on Equity Derivatives, Currency Derivatives, and Commodity derivatives segments.

[index] [504] [306] [141] [518] [416] [466] [477] [55] [164] [573]

[LIVE] Zerodha Margin Leverage Up To 20X Times - TRADING ...

Zerodha account opening link Invest and trade with Kite by Zerodha, India’s largest retail stockbroker. Open an account now. https://zerodha.com/open-account... Margin Available is the total amount available on trading account for the client to trade. Margin Used is the amount which you have used used for trading that amount has been blocked. Zerodha is providing good margin to stock market beginners so they can even trade with small amount. Open Demat account with your favorite broker from any of below links (Get Trading Course of ... Intraday trading ban SEBI New Intraday Margin Zerodha margin calculator Zerodha account opening Share trading Zerodha VaR+ELM. Loading... 2018 Zerodha Margin Trading (Live Tutorial) in Hindi. Get Zerodha Leverage up to 20X for Intraday (MIS) trading. You can use Zerodha Margin Calculator to cal...

#