Margin & Assignment for Covered calls

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Ques: If I have 500 shares of Reliance in my account. If I do a Covered calls for Reliance. I see that the Margin Requirement is taking from cash balance & not from the Reliance shares in my account. Also if the call goes ITM (In the Money), how will the assignment happen? Anybody can help?

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Hello @mailshetty

Thank you for reaching out.

Since your positions are in different segments (Equity and Options), hedge/margin benefits are not applicable. Margin benefits are typically available when positions are taken in related derivative contracts, such as holding a Reliance Futures position and taking a covered call against it.

Also, if the call option go In-The-Money (ITM) on the expiry day, there are two options

  1. If you dont opt for physical delivery, we square off the position on the expiry day and the Profit loss get adjust in the Ledger.
  2. If you opt in for physical delivery on the expiry day before 12 pm and post that the Option position will be settled at the Strike price and Shares will be debited from your account

Please feel free to reach out if you need any further clarification.

Thanks, Team 5paisa