Zerodha Cash component Collateral

Cash component vs collateral component

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For F&O margin on Zerodha, the SEBI framework requires that the user maintain a specific split between cash component and collateral component. The 50:50 rule mandates at least 50% in cash; the rest can be from pledged collateral.

What counts as each

Cash component (at least 50%)

  • Free cash in trading account.
  • Liquid fund collateral (LIQUIDBEES, similar; haircut-adjusted).
  • Option premium credit on short positions.
  • T-bill / specific liquid debt collateral.

Collateral component (up to 50%)

  • Pledged equity (haircut-adjusted).
  • Pledged ETF (non-liquid; haircut-adjusted).
  • Pledged corporate bonds.

The total = cash + collateral.

SEBI 50:50 rule

Per SEBI’s framework:

  • F&O margin requirement = SPAN + Exposure.
  • Of that, at least 50% must be in cash component.
  • Remainder up to 50% from non-cash collateral.

For Rs 4 lakh F&O margin: at least Rs 2 lakh in cash.

What happens on shortfall

If cash component < 50% of margin used:

The penalty applies even if total collateral (cash + non-cash) is sufficient; the rule is specifically about the cash sub-component.

Managing the split

For active F&O traders:

  1. Hold sufficient cash to meet the 50% minimum.
  2. Use LIQUIDBEES as cash-equivalent (earns money-market return).
  3. Pledge equity for the non-cash portion only.
  4. Monitor the split on Kite funds and Console.

A typical optimised structure:

  • Rs 5 lakh of LIQUIDBEES pledged (Rs ~4.5 lakh collateral, counts as cash).
  • Rs 10 lakh of equity pledged (Rs 8-9 lakh collateral, counts as non-cash).
  • Free cash: Rs 50K-1 lakh buffer.
  • Total usable margin: ~Rs 12.5-13.5 lakh.
  • Of which ~Rs 5 lakh is cash-equivalent.

Premium credit and the 50:50

Premium received on short options counts as cash. For an active option seller:

  • Rs 50K premium received across positions.
  • Adds Rs 50K to cash component.
  • Helps meet the 50:50 threshold.

See also

External references

References

  1. SEBI, 50:50 cash collateral framework, circulars 2020 and updates.
  2. NSE Clearing, Cash component computation, nseclearing.com.
  3. Zerodha, Margin policies and cash component, zerodha.com.

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