Removal of Calendar Spread Margin Benefit on Expiry Day

Important Update for Traders

Starting February 10, 2025, as per SEBI’s regulatory changes, the calendar spread margin benefit will no longer be available on the expiry day. However, this benefit will continue to apply on non-expiry days.

Please note: This is applicable only to calendar positions in index derivatives not stocks.

What Does This Mean for Traders?

A calendar spread strategy involves holding positions in derivative contracts of different expiries to reduce margin requirements. Until now, traders benefited from lower margin requirements even on expiry day. However, with this new regulation, traders will need to maintain additional margin on expiry day, failing which their positions may be liquidated by the RMS (Risk Management System).

Assume you have created a calendar spread strategy using current month expiry and next month expiry.

• Leg 1: Buy Nifty Future 27th Feb
  

• Leg 2: Sell Nifty Future 27th Mar
  

• The margin required for the above strategy including hedge benefit = 1,00,000
  

• On the day of expiry, i.e. 27th Feb, the margin requirement will increase and you will not get the hedge benefit.
  

• Additional margin required without hedge benefit = 50,000
  

• Revised margin required on the day of expiry = 1,50,000
  

• If you do not maintain the revised required margin on expiry day, the position will be squared off by RMS.
  

For detailed information, please refer to the circular here.

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