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Change in policies with respect to squaring off hedge positions to be in effect from 20th September 2022

19 September 2022

11:30 AM

Trading
Revision in Internal Policy

Kindly note that there have been a few changes in our internal policies for squaring off the hedge positions of the derivatives contracts that will be in effect from 20th September 2022. As per our new internal policy, the clients that enter into trades using hedging strategies in the derivatives segment are required to note the following points:

  • If the Client/s enter into a hedge position/s to realize margin benefit, must now exit the higher margin position first and then the lower margin position to square off the hedge positions.

    For instance, Mr. X entered into a hedging strategy of Bull Call Spread wherein he sold ATM 17800 CE and bought OTM 18000 CE. If Mr. X is trying to square off the 18000 CE, the order will be rejected (assuming he does not have additional funds) with a message stating,

    "CAN NOT SQ-OFF BY HEDGING FUND LIMIT INSUFFICIENT, AVAILABLE FUND = XXXX, ADDITIONAL REQUIRED FUND = XXXX."

    In such a case, Mr. X must first exit the ATM 17800 CE sell position and then the OTM 18000 CE Buy position to square off the hedge position. 
     
  • If the Client/s that hedge position/s such as the 'Calendar Spread' wherein they buy/sell different expiry contracts will not be able to square off the position/s without maintaining sufficient funds to the extent of at least one of those contracts.

    For instance, Ms. Y entered into a hedging strategy of 'Calendar Spread' wherein she bought 1 lot of Nifty Sept futures and sold 1 lot of Nifty Oct futures. If Ms. Y is trying to square off her calendar spread position, the order will be rejected with a message stating,

    "CAN NOT SQ-OFF BY HEDGING FUND LIMIT INSUFFICIENT, AVAILABLE FUND = XXXX, ADDITIONAL REQUIRED FUND = XXXX."

In such a case, Ms. Y must transfer additional funds to the extent of one of the above Nifty Futures positions to square off the Calendar Spread, or clients can contact us to square off their position/s.

The above-mentioned changes have been implemented to ensure no peak margin shortfalls are captured for exiting the hedge position.

For any queries, kindly contact our support.

 

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