What is the minimum capital required to sell the options as per the new SEBI margin rules?
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In order to buy options you can trade with 1000 rupees also but to sell options you need minimum of 1 lakh rupees depends on the option value.
But when it comes to adjusting the positions, 1 lakh capital is not enough. As per my experience, I have started option selling in 2021 with a capital of 1 lakh and the strategy i used was short strangle.
I use to sell out of the money options with a premium of Rs. 80-90/-. when the market takes directional move, I use to adjust the positions. My 1 lakh capital is good enough for adjusting positions.
The problem is when the market moves rapidly, the option value increases rapidly, at that time this 1 lakh is not enough to adjust the positions.
So, my conclusion is, you can sell options even with 1 lakh capital but to get out of profits in volatile conditions, you need more capital.
Minimum Capital Required for Option Selling
I will explain the capital required for option selling in simple words.
Option selling involves position adjusting and it also required huge capital compared to any other trading methods. To be an option seller you need adjustment skills & a decent capital (at least 10 lakhs)
Let us Understand What Option Selling is:
Options come in two types: call options and put options. To sell options, brokers typically require you to keep a certain amount of money in your trading account as collateral, known as margin amount.
This is a safety measure to ensure you can fulfill your trade if the other party exercises the option.
Options Premium:
When you sell an option, you will get a profit known as the premium. This premium is your immediate profit.
However, remember that option selling involves in unlimited risk, you may lose you entire capital in one go if you are not careful.
Required Margin for Selling Options:
The margin requirement is a percentage of the total value of the contract that you maintain in your account. The percentage varies based on factors like the stock’s volatility, the option type, option value, and the market conditions.
Risk Management:
It is very important to manage your risk carefully when selling options. Do not sell more options than you can reasonably cover with your margin. Assess the potential risk for each trade and act accordingly.
There are multiple strategies to sell options like
You can master any two of the above strategies and do paper trading practically and then enter with real money. Opstra is one of the best paper trading websites for practicing option trading.
Capital Required for Selling Options:
Option selling is more about adjusting the positions when the market goes against your view. If you have big capital you will come out with profits by adjustments otherwise you will have to end up the trade with huge losses.
Because selling options involves in unlimited risk. I suggest not to sell options if you have capital of less than 10 lakhs.
But for to start with option selling you will need at least 2 lakh capital.