Sebi's review of margin framework expected to lower hedging costs

Strategies using opposing option contracts to see lower margin

The Securities and Exchange Board of India (Sebi) review of margin framework is expected to bring down margin requirements for traders in the futures and options (F&O) segment, with some brokerages estimating a dip of 60-70 per cent for some options strategies.

“Trading option strategies will now make business sense. Margins for hedged positions could drop by 70 per cent,” said Nithin Kamath, co-founder and chief executive officer at Zerodha.

The new margin requirements by Sebi were issued on Monday, after consultation with Sebi’s Risk Management Review Committee.

According to industry experts, the new norms imply that margin required is