Can the product type of the hedged position be converted?

Answer: Yes, you can convert the product type of a hedged position from MIS to NRML or vice versa, but it’s crucial to note the impact on margin benefits. When you convert the product type of a single leg of a hedged position, such as changing from MIS to NRML, the margin benefit obtained from the hedge will be lost. This results in an increase in the required margin for both intraday and overnight positions.

Example Scenario:

Let’s consider a scenario where a client holds a long position in Nifty futures and a short position in Nifty call options, both using the MIS product type, and benefits from the margin advantage of a hedged position.

If the client decides to convert only one position to NRML, for overnight holding, the hedge margin benefit will no longer apply, leading to an increased margin requirement. However, if the client converts both positions to NRML, the margin benefits will persist.