5.5.2 Initiation of spread trade on day one

Suppose that the member does a calendar spread trade by buying 300 contracts of 3 months futures and selling 300 contracts of 1 month futures.

Since the near month contract of the spread is five days to expiry, the member will have the full benefit of spread margining:

  • Margin on spread = 1% * 300 * 1,00,000 = 3,00,000
  • Spread open position 300 * 1,00,000 * 1/ 3 = 1,00,00,000
Adding the figures for the earlier long position we get:
  • Total open position = 2,00,00,000 + 1,00,00,000 = 3,00,00,000
  • Liquid net worth = 70,00,000 - 10,00,000 - 3,00,000 = 57,00,000
Both conditions in 4.2 above are satisfied as shown below:

Condition 1. 57,00,000 > 50,00,000

2. 57,00,000 * 331/3 = 19,00,00,000 > 300,00,000
 
 

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