Derivatives on WebNotes

How to avoid physical settlement (manual close-out)

Tue, 12 May 2026 00:00:00 +0000

Physical settlement of in-the-money stock options and stock futures on NSE, mandated by SEBI since 2018, creates share delivery and receipt obligations that most retail traders do not want. The practical alternative is to manually close out the position before expiry. This guide explains the close-out deadline, the cost advantage of closing before settlement, and the exact steps to exit cleanly.

For a full explanation of what happens if you allow physical settlement to proceed, see How to physically settle an in-the-money option.

How to backtest a strategy on Streak

Tue, 12 May 2026 00:00:00 +0000

Streak is a no-code algorithmic trading platform integrated with Zerodha that allows traders to build, backtest, and deploy rule-based strategies on equities and F&O contracts without writing a single line of code. This guide focuses on the backtesting workflow: how to define a strategy, run it against historical data, and critically evaluate the results.

For the deployment workflow once a backtest is satisfactory, see How to deploy a Streak strategy live. For the underlying brokerage platform see Streak platform overview and Kite, Zerodha’s trading platform.

How to build an options strategy on Sensibull

Tue, 12 May 2026 00:00:00 +0000

Sensibull is an options analytics platform integrated with Zerodha that allows traders to design, visualise, and execute multi-leg options strategies without building the position leg by leg in Kite. This guide explains how to use the strategy builder to construct a strategy, read its payoff chart and Greeks, and send it to Kite as a basket order.

For background on the underlying platform see Sensibull and Kite, Zerodha’s trading platform. For payoff chart interpretation specifically, see How to use options payoff charts on Sensibull.

How to calculate margin using the Zerodha SPAN calculator

Tue, 12 May 2026 00:00:00 +0000

The Zerodha SPAN margin calculator at zerodha.com/margin-calculator is the standard tool for estimating the funds required before initiating a futures or options position on the NSE or BSE. This guide explains how the calculator works, how to read its output, and what the regulatory margin components mean.

For background on how margin works in the F&O segment see F&O segment on Zerodha and Margin pledge mechanics.

What SPAN and ELM mean

SPAN (Standard Portfolio Analysis of Risk) is a margin methodology developed by the Chicago Mercantile Exchange and adopted by Indian exchanges. SPAN calculates the worst-case one-day loss on a portfolio under 16 market scenarios that combine price and volatility moves. The exchange updates SPAN parameter files (called risk parameter files or RPFs) intraday, typically at 11 AM and after market close.

How to deploy a Streak strategy live

Tue, 12 May 2026 00:00:00 +0000

Streak allows a backtested rule-based strategy to be promoted to live execution, routing orders directly into Zerodha Kite without manual intervention for each signal. This guide covers the steps from backtested strategy to live market deployment, including paper trading validation, margin checks, risk controls, and ongoing monitoring.

For the backtest workflow that precedes this step see How to backtest a strategy on Streak. For the platform overview see Streak platform overview.

Why paper trade before going live

Backtesting uses historical data with idealised fill assumptions. Paper trading (Streak’s virtual portfolio mode) runs the strategy on live market data with the same logic but without real money. This intermediate step validates:

How to exit a multi-leg F&O position on Zerodha

Tue, 12 May 2026 00:00:00 +0000

Exiting a multi-leg F&O position on Zerodha requires closing every leg in a controlled sequence that avoids leaving any open naked exposure. A poorly managed exit, where one leg closes but another remains open, can transform a defined-risk strategy into an unhedged position with potentially large losses. This guide explains how to close all legs cleanly using the basket order method and what to do in an emergency.

For entry via basket order see How to use basket order for multi-leg options on Kite. For building the strategy initially see How to build an options strategy on Sensibull.

How to handle freeze quantity on F&O

Tue, 12 May 2026 00:00:00 +0000

The freeze quantity is the maximum number of units (shares or index units) that can be submitted in a single order on NSE or BSE F&O contracts. Any order exceeding the freeze quantity is automatically rejected by the exchange. This guide explains how to find the freeze quantity for a specific contract and how to manage large orders by splitting them appropriately.

For context on F&O order placement see How to trade futures on Kite (first time) and How to use basket order for multi-leg options on Kite.

How to interpret the margin shortfall SMS on Zerodha

Tue, 12 May 2026 00:00:00 +0000

A margin shortfall notification from Zerodha indicates that the margin in the trading account is insufficient to cover the margin required for one or more open F&O positions. This can trigger a peak margin penalty, forced position close-out, or both. This guide explains how to read every element of the SMS, identify the root cause, and take corrective action promptly.

For the background regulatory framework see How to understand peak margin penalty. For maintaining margin proactively see How to calculate margin using the Zerodha SPAN calculator.

How to physically settle an in-the-money option

Tue, 12 May 2026 00:00:00 +0000

Physical settlement means that an in-the-money stock option or stock futures contract, if held to expiry on NSE, results in the actual delivery of the underlying shares rather than a cash payment of the difference between the option price and the settlement price. SEBI mandated physical settlement for all NSE stock derivatives via a circular in April 2018. This guide explains what happens, what your obligations are, how to confirm settlement, and what costs arise.

How to read option Greeks on Kite

Tue, 12 May 2026 00:00:00 +0000

Option Greeks are sensitivity measures that quantify how an option’s price changes in response to changes in the underlying price, time, implied volatility, and interest rates. Kite displays Greeks in its options chain Greek tab; Sensibull shows net Greeks for multi-leg strategies. This guide explains how to find and interpret each Greek and how to use them to make better trade decisions.

For the options chain navigation itself see How to use the options chain on Kite. For applying Greeks to a full strategy see How to build an options strategy on Sensibull.

How to roll over an F&O position on Zerodha

Tue, 12 May 2026 00:00:00 +0000

Rolling over an F&O position means closing the expiring near-month contract and simultaneously (or near-simultaneously) opening an equivalent position in the next-month contract, thereby maintaining continuous market exposure beyond the current contract’s expiry without triggering physical settlement or forced close-out.

For context on F&O segment operations see F&O segment on Zerodha and How to trade futures on Kite (first time).

When rollovers are necessary

NSE and BSE list F&O contracts for three monthly expiry cycles (current month, next month, and the month after that). Each contract expires on the last Thursday of its month. On expiry day, the contract settles: futures contracts settle to the final settlement price (the closing spot price of the underlying), and options contracts settle to their intrinsic value.

How to trade futures on Kite (first time)

Tue, 12 May 2026 00:00:00 +0000

This guide walks through placing a futures trade on Kite for the first time. Futures are standardised exchange-traded contracts to buy or sell an underlying asset at a fixed price on a specific expiry date. On Indian exchanges, equity futures are settled daily on a mark-to-market basis and finally settled (cash or physical) on expiry. This guide covers the mechanics of executing the trade; for the regulatory and margin framework see F&O segment on Zerodha.

How to trade options on Kite (first time)

Tue, 12 May 2026 00:00:00 +0000

This guide covers placing an options trade on Kite for the first time. Options are contracts that give the buyer the right, but not the obligation, to buy (call) or sell (put) an underlying asset at a specified price (the strike) on or before the expiry date. On the NSE, all equity index and stock options are European-style, meaning they can only be exercised at expiry, not before.

For strategy construction and payoff analysis, see How to build an options strategy on Sensibull and How to use options payoff charts. For the margin framework, see How to calculate margin using the SPAN calculator.

How to understand peak margin penalty

Tue, 12 May 2026 00:00:00 +0000

The peak margin framework, introduced by SEBI via circular SEBI/HO/MRD/MRD-PoD-2/P/CIR/2020/198 on 1 December 2020 and fully enforced from 1 September 2021, requires brokers to report the highest margin required by any client at any of four random intraday snapshots each day. If a client’s margin at any snapshot is less than what is required for their open positions, a penalty is levied. This guide explains the mechanics, the penalty structure, and how to avoid shortfalls.

How to use options payoff charts on Sensibull

Tue, 12 May 2026 00:00:00 +0000

The payoff chart on Sensibull is the primary visual tool for understanding what an options strategy earns or loses across a range of possible outcomes at expiry. It also shows the strategy’s current mark-to-market value as implied volatility and time change, making it an essential diagnostic before and during a trade. This guide explains how to read every element of the chart and how to use Sensibull’s interactive features for pre-trade strategy selection.

How to use the basket order for multi-leg options on Kite

Tue, 12 May 2026 00:00:00 +0000

The basket order feature on Kite allows you to prepare and submit up to ten orders in a single click, making it the standard tool for entering multi-leg options strategies where each leg must be placed as close to simultaneously as possible. This guide explains how to build a basket, set prices, and manage the submission, including what to do when legs fill partially.

For building the strategy before execution see How to build an options strategy on Sensibull. For exiting an existing multi-leg position see How to exit a multi-leg F&O position on Zerodha.

How to use the options chain on Kite

Tue, 12 May 2026 00:00:00 +0000

The options chain on Kite provides a unified view of all call and put contracts for a given underlying and expiry, along with real-time pricing, open interest, implied volatility, and the option Greeks. Understanding how to read it is a prerequisite for informed options trading on Zerodha.

For background on how F&O trading works see How to trade options on Kite (first time) and F&O segment on Zerodha.

What the options chain shows

An options chain is a table listing every tradable strike for a given underlying and expiry, with live market data for both the call and put side. Each row is a single strike price; the corresponding CE and PE contracts for that strike appear on opposite sides of the table.

F&O segment on Zerodha

Mon, 11 May 2026 00:00:00 +0000

The Futures and Options (F&O) segment on Zerodha covers exchange-traded equity derivatives on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). This segment includes index futures, index options, stock futures, and stock options on SEBI-approved underlying securities. Zerodha is among India’s largest F&O brokers by volume, with the segment accounting for a substantial share of its brokerage revenue despite the flat-fee model.

All F&O contracts in India are cash-settled, meaning no physical delivery of shares occurs except in the case of stock futures and stock options contracts in their expiry month, which were mandatorily moved to physical settlement by SEBI in a phased manner beginning in 2018.