F&O on WebNotes

How to sell a call option on Zerodha Kite

Sun, 21 Jun 2026 00:00:00 +0000

Writing a call option means selling a contract you do not own, collecting the premium, and taking on the obligation to deliver the underlying at the strike price if the buyer exercises. On Zerodha Kite this is a sell-to-open order on the NFO segment, and it is one of the highest-risk trades a retail account can place. The writer’s gain is capped at the premium received; the loss on a naked (unhedged) short call is theoretically unlimited, because the spot price can rise without a ceiling.

How to sell a put option on Zerodha Kite

Sun, 21 Jun 2026 00:00:00 +0000

Writing a put option means selling a contract, collecting the premium, and taking on the obligation to buy the underlying at the strike price if the buyer exercises. On Zerodha Kite this is a sell-to-open order on the NFO segment. The writer’s gain is capped at the premium received; the loss is the strike minus the premium, realised in full only if the underlying falls to zero. That makes a short put a large but bounded risk, the structural difference from the unlimited risk of a naked short call .

Covered call margin benefit

Wed, 20 May 2026 00:00:00 +0000

A covered call (long stock + short call on the same underlying) earns the margin benefit because the underlying stock provides the delivery commitment for the short call. The strategy is popular for generating additional income on long-term equity holdings.

Structure

Covered call = Long stock + Short call (same underlying).

Example:

Hold 100 RELIANCE shares (long).
Sell 1 RELIANCE 2950 CE (short call).

If RELIANCE rises above 2950 by expiry:

Hedged positions margin benefit on Zerodha

Wed, 20 May 2026 00:00:00 +0000

Hedged F&O positions on Zerodha enjoy reduced SPAN margin compared to naked positions. The SPAN engine recognises offsetting legs (long + short, long-call + long-put strangle, etc.) and reduces the worst-case loss scenario, resulting in lower margin requirements.

How hedge benefit works

The SPAN engine runs 16 stress scenarios across the portfolio. For each scenario:

Naked short call: large loss in up-scenarios.
Long call (hedge): gain in up-scenarios offsetting the short.
Net loss across scenarios is much smaller.

The SPAN margin reflects the smaller worst-case loss, giving the hedge benefit.

Market orders blocked for deep ITM index options

Wed, 20 May 2026 00:00:00 +0000

Zerodha Kite blocks market orders for deep ITM (in-the-money) index options to protect retail clients from large slippage. For these contracts, only limit orders are accepted.

Why blocked

Deep ITM index options often have:

Wide bid-ask spreads (10-20% or more).
Thin order book depth at quoted prices.
Mostly intrinsic value (minimal time value).

A market order on a deep ITM option could execute multiple ticks away from LTP, causing substantial loss. Brokers block market orders to prevent this.

Market orders blocked for long-dated options

Wed, 20 May 2026 00:00:00 +0000

Zerodha Kite blocks market orders for long-dated (far-month, far-quarter) options to protect retail clients from substantial slippage on illiquid contracts.

Why blocked

Long-dated options typically have:

Thin liquidity (low volume).
Wide bid-ask spreads (5-15% or more).
Limited order book depth.

A market order would execute at the next available price, which can be far from the displayed LTP.

What “long-dated” means here

For NSE F&O:

Near-month (current expiry): usually market orders allowed.
Next-month (one month out): market orders allowed.
Far-month (3+ months out): market orders blocked.
Quarterly long-dated (6+ months): blocked.

The exact cutoff varies by contract and Kite’s risk framework.

Naked option selling margin on Zerodha

Wed, 20 May 2026 00:00:00 +0000

A naked (unhedged) short option position on Zerodha requires the full SPAN + Exposure margin, with no hedge benefit. This makes naked option selling capital-intensive but is the standard structure for many premium-collection strategies.

What “naked” means

A short option position with no offsetting hedge:

Short call with no long call hedge.
Short put with no long put hedge.
Selling either side of a strangle without protective wings.

The seller’s loss is theoretically unlimited (for short calls) or substantial (for short puts).

How to use collateral margin for F&O on Zerodha

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

After pledging securities and generating collateral margin on Zerodha , the collateral margin is ready for use in futures and options positions without any additional configuration. Kite automatically draws from the combined pool of cash and collateral when you place F&O orders. The critical constraint is SEBI’s rule that at least 50% of the total margin requirement must be in cash or cash equivalents. Understanding how to track and manage this split is the primary skill required to trade F&O on collateral efficiently.