A new order I placed was rejected due to insufficient margins and I noticed that the system has blocked additional margins for an existing long option position. Why does this happen?

Why is my new order getting rejected for insufficient margin when I have a long options position?

The rejection of a new order due to insufficient margin while holding a long options position may be because your existing long position has transitioned into an In The Money (ITM) option. According to our physical settlement policy, all ITM positions must have adequate margins in the last week of expiry.

The Exchange imposes physical delivery margins as a percentage of applicable margins (VaR + ELM + Adhoc) of the underlying stock. This is levied from expiry minus 4 days for long ITM options as follows:

E-4 Day (Friday BOD): 10% of VaR + ELM + Adhoc margins

E-3 Day (Monday BOD): 25% of VaR + ELM + Adhoc margins

E-2 Day (Tuesday BOD): 45% of VaR + ELM + Adhoc margins

E-1 Day (Wednesday BOD): 70% VaR + ELM + Adhoc margins

Margins can also vary on an intraday basis based on the option status (ITM/OTM). For example:

9:15 am: IRCTC2700CE is OTM (Out of The Money)

9:45 am: IRCTC2700CE becomes ITM (In The Money) as the spot price hits 2750

10:00 am: IRCTC2700CE returns to OTM as the spot price drops to 2600

The margins won’t change at market open (9:15 AM) since margins are already blocked for the OTM 

option. At 9:45 AM, when the option becomes ITM, an additional margin of 25% (VAR + ELM) will be blocked. If a new order is placed without sufficient margins, it will be rejected.

Important notes:

In cases of very volatile stock movements, the change in moneyness may be quick, leading to order rejections or acceptances. Ensure you maintain sufficient margin for successful order placement.

On Wednesday and Thursday of the expiry week, we block 50% of the contract value for ITM options.