As per SEBI regulations, margin shortage penalty is levied on overnight positions held in trading account without sufficient margin as prescribed by exchange.  For intraday positions shortfall margin penalty is not levied. It is levied in Equity Derivatives, Currency Derivatives and Commodity derivatives segments.

How is the penalty calculated?

If there is a debit balance per segment per day, and margin amount is less than 1 lac and also margin short fall amount is  less than 10% then 0.5%  penalty on shortage amount will be levied. If the shortfall is greater than 1 lac it is charged 1% of shortage amount.

Penalty per day in %
< Rs 1 Lac and <10% of applicable margin 0.5
≥ Rs 1 Lac and ≥10% of applicable margin 1

0.5% of penalty will be levied for first 3 days of debit. If the shortfall continues to 4th day then the penalty of 5% will be levied for each day from 4th day onwards.

If the shortfall is caused due to movement of  3% or more in nifty on any trading day then the shortage penalty will be charged only if shortfall continues to T+2 days.

Example:

With the available balance of Rs.10000, there is an overnight future position created with the margin of Rs.10000 on T day (This included span and exposure margin both as per exchange requirement). Due to market volatility, account is debited with the loss of Rs.2000 on same day. In this case, though the amount is less than 1 lac but the shortfall is greater than 10%. Hence,  1% penalty will be levied on the shortage amount (2000) on T+1 day. On each day till T+3 day the debit amount would be Rs.20 (2000*1%). If the shortage continues then from 4th day onwards the debit amount would be Rs. 100(2000*5%).

Comments

  1. Mohini Arun Chaudhari your client ...

    How to sell options initially…and then buying the same at lower rate to gain profit….what are the fund requirements in this case? kindly illustrate with few examples….

    1. Trade Smart Online Article Author

      Hi Mohini Arun Chaudhari,
      For selling any options, you would required to pay exchange prescribed marging which is approximately equal to a Future Margin.

      Example: Let us assume you are selling 1 lot (75 qty) of Nifty options, December expiry then margin required is around Rs.15800 for intraday and around Rs.47500 to carry forward(Overnight). Margin requirement through Cover Order is around Rs.9500. You may also calculate margin requirement for options trading from Margin Calculator.

      For more information about options trading please refer NSE Paathshaala.

  2. jayesh varma

    I bought options with money got from cash market selling.My ledger is positive for the day.Is margin shortfall applicable for the day?if so how much?

    1. Trade Smart Online Article Author

      Hello Jayesh Varma,
      Margin shortage penalty is applicable after considering haircut %(Risk factor associated with stock). Let us consider an example.
      You sold 10000 value of xyz stock. This stock has the haircut of 40%. After haircut the share value comes to 6000
      Case 1: If you buy option of worth 5000 then there will be no penalty charged to you. Because the value of share is 6000 and you are utilizing only 5000.
      Case 2: If you buy option of worth 8000 then the shortage is 2000(8000-6000). Penalty will be applicable on shortage amount of 2000. Above article would brief you how the margin penalty is calculated. Please let us know if still you have any questions.

      Hope this is clear to you.

  3. Amrish Charaniya

    If i have create option position for intraday and same i have squared off on same day also book mark to mark loss so pls confirm is penalty will be imposed or not??

    1. Trade Smart Online Article Author

      Hello Amrish,
      In case of your example, if you incur loss and your ledger is debit due to this loss then you will be charged margin shortage penalty. You may refer Margin Shortage Penalty article for more information.

    1. Trade Smart Online Article Author

      Hi Bhagwan,
      We provide 4 times exposure in equity delivery provided if your account is active in EquiMax. In case you use product type CNC for buying stocks in delivery then no margin is provided, you are required to maintain full amount in your account.

  4. aditya

    i ve shold 3 lots bank nifty PE intraday and make a loss of 14000 rupees mtm .my broker had sqare off my possition insame day.and total losses was deducted from my trading acccount.it fine but in next they sent me msg you have span mirgin shortfall of15700 and is sujected to penalty.and deducted 157 rupees from my trading accont .is it legal sir please help me.i shall exhaust my total trading accont .if they deduct it as daily basis

    1. Trade Smart Online Article Author

      Hello Aditya,
      As per the trade that you mentioned, it seems that you had a negative balance due to derivative trade. In such cases you will be charged margin shortfall penalty. Request you to share your client ID, we will check out your transaction and let you know what exactly has happened.

  5. Vivek

    What is the margin requirement for option strategies with limited loss? Is the benefit of reduced risk given by reducing margin or margin will be calculated as if every option writing is done individually?

      1. Vivek

        I am not asking how to limit loss. I am also not interested in intra day trading. I would like to carry forward the positions till expiry. I wanted to know margin requirement for limited loss strategy like spread orders. Margin calculator shows as if only naked short options are in portfolio. Margin calculator does not account for limited loss for the selected strategy. Please clarify if margin requirement is just maximum loss for a given strategy or simple arithmetic total for short options?

        1. Trade Smart Online Article Author

          Margin requirement would be the maximum loss for your short options. Kindly provide your contact details so that we can explain you in detail.

  6. Nikhil Anil Thombare

    I have selled put of jublient food of premium 2150 @3.35 now there is margin short fall and it is totally a dry counter .i have 15000 in my account suppose those 15000 are now over and I still haven’t completed margin short fall then as per the sebi rules what can happen at the last stage if I don’t cover that margin short fall plz reply as soon as possible

    1. Trade Smart Online Article Author

      Hello Nikhil,
      In case of margin shortfall, you are required to pay the amount to the extent of shortfall. As explained in the above article, you will be changed daily penalty and penalty % varies as per the margin shortfall amount and for how long the shortfall is continued.

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