Markets: A Rigorous Course

M09 · Problem 16 ★★ Check

Costs and margin for an Indian short strangle

A trader sells one lot of the 7-day 24,500/25,500 Nifty strangle for a credit of ₹3,967 (Nifty 25,000) and holds to expiry, where both legs expire worthless. (a) Using the charges as of 6 Nov 2026 (STT 0.15% of premium on sale, NSE transaction charge 0.03553% of premium, brokerage ₹20 per order, GST 18% on brokerage and transaction charges, SEBI fee ₹10 per crore), compute total costs. (b) How much extra margin does the 2% expiry-day ELM add, in rupees? (c) In the simulation of 9.9 with markup 1.2, the mean P&L was 5.4 bp of notional per week. Express that in rupees per lot and compare with the costs. What happens if the put leg finishes in the money by 100 points?

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