Thanks for your detailed questions. Happy to clarify.
1. Capital Range
Yes, the minimum allocation for Zen Credit Spread Overnight is ₹1 lakh, and the maximum allocation is ₹3.2 lakh.
2 & 3. How many lots will the algo trade?
There isn’t a fixed number of lots. It depends on the margin required for the trade, which varies based on the option premiums at the time of entry.
Generally, 1 lot requires around ₹55,000–₹60,000 in margin.
With an allocation of ₹1 lakh, the algo will typically trade 1 lot. But if the margin requirement is lower on a particular day, it may be able to take 2 lots.
With an allocation of ₹3.2 lakh, the algo usually trades 4–6 lots, depending on the margin requirement and option premiums on that day.
4. Will the algo automatically increase the quantity if my account balance grows?
No. The algo trades based on the capital allocated to it, not the total balance available in your trading account.
5. If my capital grows due to profits, will the algo automatically use the additional capital?
No. Any profits added to your ledger are not automatically considered for position sizing.
6. How can I increase the quantity/allocation then?
If you want the algo to use more capital, you can simply use the “Edit Capital” option for that deployment and increase the allocation. The algo will then size future trades based on the updated allocation.
7. Is there a formula for quantity scaling?
There isn’t a fixed formula. The quantity primarily depends on the margin required for that day’s trade, which varies with option premiums and market conditions. That’s why the number of lots can differ even for the same allocated capital.
Hope this clears it up! If you have any other questions around deployment or capital allocation, feel free to ask.
Since the number of lots depends on the margin requirement, is there any minimum free balance or buffer that should always be maintained above the allocated capital to avoid order rejection due to margin fluctuations?
Also, if the margin requirement suddenly increases after deployment (because of volatility or exchange changes), will the algo automatically reduce the number of lots for the next trade, or will it skip the trade if sufficient margin isn’t available
The minimum capital requirement for every algo is determined after considering the margin requirements of the strategy, with the objective that trades are not skipped due to insufficient margins under normal circumstances.
Since margin requirements can vary with option premiums and exchange regulations, the number of lots is automatically determined based on the allocated capital and the margin required at the time of trade. If margins are higher, the algo may take fewer lots instead of forcing the same quantity.
So, in general, you don’t need to maintain an additional buffer over and above the allocated capital specifically to avoid order rejections. The minimum allocation itself is designed keeping this in mind. However, it’s always a good practice to avoid blocking your available funds with other positions or orders, as that could impact margin availability.
