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:

Peak margin on hedged positions

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

Peak margin reporting for hedged F&O positions uses the hedge-adjusted SPAN, not the standalone SPAN of individual legs. This is consistent with hedged positions margin benefit .

How peak margin treats hedged positions

The clearing corporation’s peak margin snapshot reads the portfolio SPAN at the snapshot moment:

If positions are properly hedged at the snapshot: hedge-adjusted SPAN applies.
Lower margin required.
Less likely to trigger shortfall.

Risk if hedge is broken

If one leg of a hedge is closed (intentionally or via partial fill):

Hedge on WebNotes

Covered call margin benefit

Structure

Peak margin on hedged positions

How peak margin treats hedged positions

Risk if hedge is broken