In continuation of SEBI’s efforts to strengthen the derivatives market, the next set of changes will come into effect in February 2025. These updates aim to improve investor safety, reduce excessive risk, and bring more stability to the market. The changes include the two key points :
1.Removal of calendar spread margin benefits on expiry day.
SEBI has noticed that on expiry days, the prices of contracts expiring on the same day can move differently from similar contracts with later expiry dates. This creates a significant risk. To reduce this risk, SEBI has decided to remove the calendar spread margin benefit for contracts on their expiry day. This means traders will no longer get margin benefits for offsetting positions across different expiries on the expiry day. However, this benefit will still be available for contracts with expiries beyond the current expiry day.
This has been implemented on Dhan & it will be in effect from next weekly expiry i.e. Tuesday, 11th February 2025.
2.Mandatory upfront collection of option premiums from option buyers.
Options contracts come with high implicit leverage and can see quick price swings. To prevent excessive intraday leverage for end-clients and ensure all positions have enough collateral, brokers must now collect the net options premium from buyers upfront. This rule aligns with the existing requirement of collecting Initial Margin (IM) and Extreme Loss Margin (ELM).
This point has no direct impact for the Dhan users. This system was always in place.
With this, two more points from SEBI’s circular dated October 1, 2024, are now implemented. Let us know in the thread below, how these changes and evolving market conditions affected your trading style? What changes have you done in your trading strategies?
Regards
Naman