SEBI has established rules and regulations for trading in Futures and Options (F&O) and other segments to protect the interests and capital of traders and investors.
However, sometimes unrealistic demands from brokers lead to losses for retail traders.
Recently, a case emerged where Tarun (name changed) tried to modify his options trading position but was asked for the full margin, which is against SEBI margin rule.
As a result, he couldn’t close the position and lost his capital.
Here is what happened to Tarun on May 23, 2024.
Tarun: Hello, ADB Team. I need your help with an issue related to trading Nifty options.
ADB: Hello. We’re here to help. Please tell us what happened.
Tarun: I trade Nifty options and on May 23rd, during Nifty’s expiry, I was trading with one of the leading stockbrokers but switched to another broker’s as the former broker was not allowing option carry forward.
I created a strangle position, but when the market went up, I started incurring losses on the call side.
To hedge my position, I tried tried to shift my PE position 200 strike price away, but broker started demanding the full margin.
ADB: What did the broker say about the margin requirements?
Tarun: Broker said that if I used their basket order feature, I would get the necessary margin, but I still had to pay the full margin upfront.
According to SEBI rules, I should have received the margin benefit, so I adjusted my call and put positions, but they didn’t allow my sell order.
ADB: Did you file a complaint in NSE or in SCORES portal of SEBI?
Tarun: Yes, I did. SEBI replied that I should get the margin benefit and that I should continue trading and create new margins. However, I told them that this would double my margin requirement, which is against SEBI rules. I believe the broker should provide the margin benefit.
ADB: Do you have any records of your communication with the broker and SEBI?
Tarun: Yes, I have all the emails and communication records.
ADB: Please share those documents with us. We’ll review them and start an investigation. It’s important to ensure brokers follow SEBI rules to protect traders like you.
Tarun: Thank you. I’ll send over the documents right away. I need to ensure I’m not unfairly disadvantaged in my trading.
ADB: We appreciate your cooperation. We’ll await your documents and start the investigation immediately. We’ll keep you updated on our progress.
