Question about Capital Allocation & Quantity Scaling?

APIs, Automation, Algos & Code
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I am planning to deploy the Zen Credit Spread Overnight strategy.

I have a few questions regarding capital allocation and quantity:

  1. The strategy shows a minimum capital of ₹1,00,000 and a maximum capital of ₹3,20,000.

  2. If I deploy it with the minimum capital (₹1,00,000), how many lots/quantity will the algo trade?

  3. If I deploy it with the maximum capital (₹3,20,000), how many lots/quantity will it trade?

  4. Does the algo automatically increase the number of lots as my account balance grows, or does it continue trading the same quantity?

  5. If my capital increases because of profits and I do not withdraw the profits, will the algo automatically rebalance and use the additional capital?

  6. Or do I need to manually refill, redeploy, or update the capital allocation for the algo to trade higher quantities?

  7. Is there any formula that determines how quantity scales with account capital?

I would appreciate clarification on how position sizing works.

Full Capital Requirement Is Preventing Algo Rebalancing and Drawdown Control
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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.

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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