1
00:00:00,100 --> 00:00:02,125
Order accepted.

2
00:00:02,125 --> 00:00:04,763
Can Mira afford the loss?

3
00:00:04,763 --> 00:00:07,688
She reaches for the trading button.

4
00:00:07,688 --> 00:00:11,562
Dev brings a larger possible loss into view.

5
00:00:11,562 --> 00:00:15,550
The broker's approval does not answer that question.

6
00:00:15,550 --> 00:00:19,637
It checks whether the required support is available.

7
00:00:19,637 --> 00:00:23,475
Mira must separately check what she could lose.

8
00:00:23,475 --> 00:00:27,650
She must also keep money available for payments.

9
00:00:27,650 --> 00:00:31,137
Today, we separate those three checks.

10
00:00:31,137 --> 00:00:34,525
Then we work through a made up account.

11
00:00:34,525 --> 00:00:38,450
Every amount here is an example for learning.

12
00:00:38,450 --> 00:00:41,913
This is not a plan for your own money.

13
00:00:41,913 --> 00:00:46,296
Mira keeps her real money aside and uses paper.

14
00:00:46,996 --> 00:00:51,721
First comes margin: support required for the position.

15
00:00:51,721 --> 00:00:55,496
Imagine money kept in a broker's margin tray.

16
00:00:55,496 --> 00:00:59,658
The trade stays open while that support is needed.

17
00:00:59,658 --> 00:01:03,046
This tray is not a limit on losses.

18
00:01:03,046 --> 00:01:07,846
An uncovered sold option can lose more than its margin.

19
00:01:07,846 --> 00:01:11,696
Second comes possible loss for the whole position.

20
00:01:11,696 --> 00:01:16,596
Some correctly matched structures have a bounded expiry loss.

21
00:01:16,596 --> 00:01:21,159
That bound depends on keeping the whole structure intact.

22
00:01:21,159 --> 00:01:26,221
Third comes usable cash: money available when payments arrive.

23
00:01:26,221 --> 00:01:29,821
Something you own may not be spendable cash.

24
00:01:29,821 --> 00:01:33,958
Mira keeps these three checks on separate pages.

25
00:01:33,958 --> 00:01:37,680
Passing one does not mean passing the others.

26
00:01:38,380 --> 00:01:42,030
Mira draws a made up two lakh rupee account.

27
00:01:42,030 --> 00:01:45,380
Emergency savings stay outside it.

28
00:01:45,380 --> 00:01:48,518
Borrowed money stays outside too.

29
00:01:48,518 --> 00:01:52,755
Money needed for living costs does not belong here.

30
00:01:52,755 --> 00:01:57,468
She sets eighty thousand aside for initial margin use.

31
00:01:57,468 --> 00:02:02,117
One lakh stays available for changes and execution.

32
00:02:02,117 --> 00:02:06,730
Twenty thousand is set aside for costs and surprises.

33
00:02:06,730 --> 00:02:10,543
Together, those amounts make two lakh rupees.

34
00:02:10,543 --> 00:02:15,668
These are example bookkeeping boxes, not a recommended split.

35
00:02:15,668 --> 00:02:19,580
They are not amounts required by an exchange.

36
00:02:19,580 --> 00:02:23,242
The money left over does not guarantee safety.

37
00:02:23,242 --> 00:02:27,330
A severe move can still exhaust available money.

38
00:02:27,330 --> 00:02:31,440
Check possible losses and cash needs separately.

39
00:02:32,140 --> 00:02:35,803
Now Dev places two matching options together.

40
00:02:35,803 --> 00:02:37,815
One is sold.

41
00:02:37,815 --> 00:02:40,615
Another is bought for protection.

42
00:02:40,615 --> 00:02:44,765
They have the same expiry and equal quantities.

43
00:02:44,765 --> 00:02:48,015
Together, they receive a net credit.

44
00:02:48,015 --> 00:02:52,728
That means money received after paying for the bought option.

45
00:02:52,728 --> 00:02:57,240
In this example, the strike gap is two hundred points.

46
00:02:57,240 --> 00:03:00,828
The net credit is forty rupees per unit.

47
00:03:00,828 --> 00:03:03,703
Subtract forty from two hundred.

48
00:03:03,703 --> 00:03:07,728
That leaves one hundred sixty rupees per unit.

49
00:03:07,728 --> 00:03:11,565
This is the largest gross loss at expiry.

50
00:03:11,565 --> 00:03:16,190
It applies to this intact, correctly matched credit spread.

51
00:03:16,190 --> 00:03:20,540
Gross means before charges and execution costs.

52
00:03:20,540 --> 00:03:24,456
Different structures need their own calculation.

53
00:03:25,156 --> 00:03:29,131
One hundred sixty is the risk for one unit.

54
00:03:29,131 --> 00:03:32,968
Mira's example uses sixty five units.

55
00:03:32,968 --> 00:03:36,618
Multiply one hundred sixty by sixty five.

56
00:03:36,618 --> 00:03:41,244
The gross expiry loss is ten thousand four hundred rupees.

57
00:03:41,244 --> 00:03:44,531
Costs can make the total loss larger.

58
00:03:44,531 --> 00:03:49,006
Now change only the example quantity to thirty units.

59
00:03:49,006 --> 00:03:53,943
One hundred sixty times thirty is four thousand eight hundred.

60
00:03:53,943 --> 00:03:58,606
That comparison does not prove one index is safer.

61
00:03:58,606 --> 00:04:03,844
Actual contracts, prices, and market movements also differ.

62
00:04:03,844 --> 00:04:08,131
These quantities come from dated reference examples.

63
00:04:08,131 --> 00:04:12,618
Always check the lot size for the exact current contract.

64
00:04:12,618 --> 00:04:17,393
For a debit spread, start with total net money paid.

65
00:04:17,393 --> 00:04:22,056
That is its gross expiry loss, with costs additional.

66
00:04:22,756 --> 00:04:27,318
Suppose one basket needs forty five thousand rupees.

67
00:04:27,318 --> 00:04:31,468
Mira's example margin budget is eighty thousand.

68
00:04:31,468 --> 00:04:34,981
Suppose two together need ninety thousand.

69
00:04:34,981 --> 00:04:36,956
They do not fit.

70
00:04:36,956 --> 00:04:41,231
Use the broker's combined estimate for the whole basket.

71
00:04:41,231 --> 00:04:45,668
Do not assume margin always doubles with quantity.

72
00:04:45,668 --> 00:04:49,543
But fitting the margin budget still proves too little.

73
00:04:49,543 --> 00:04:54,056
A later example loses up to seven thousand eight hundred.

74
00:04:54,056 --> 00:04:58,444
That is one intact example lot, before costs.

75
00:04:58,444 --> 00:05:03,706
Mira's practice loss allowance is four thousand, including costs.

76
00:05:03,706 --> 00:05:07,281
Even one lot fails that full loss check.

77
00:05:07,281 --> 00:05:10,206
The quantity that fits is zero.

78
00:05:10,206 --> 00:05:14,781
Hoping to exit earlier does not change the expiry bound.

79
00:05:14,781 --> 00:05:17,664
Mira leaves the order unsent.

80
00:05:18,364 --> 00:05:22,477
Mira also owns shares pledged as support.

81
00:05:22,477 --> 00:05:26,889
Their accepted value can be below their market value.

82
00:05:26,889 --> 00:05:30,014
That reduction is called a haircut.

83
00:05:30,014 --> 00:05:34,102
The shares are not necessarily cash for a payment.

84
00:05:34,102 --> 00:05:37,401
Now imagine the market falls sharply.

85
00:05:37,401 --> 00:05:40,039
A sold put may lose money.

86
00:05:40,039 --> 00:05:44,389
The pledged shares may lose value at the same time.

87
00:05:44,389 --> 00:05:48,151
Loss rises while available support falls.

88
00:05:48,151 --> 00:05:52,514
Check your broker's current collateral and payment rules.

89
00:05:52,514 --> 00:05:57,101
Do not treat all received premium as spending money.

90
00:05:57,101 --> 00:06:01,652
Bought options and realised losses also need funding.

91
00:06:01,652 --> 00:06:06,527
A basket of shares does not cap an index short call.

92
00:06:06,527 --> 00:06:11,160
Keep usable cash separate from the value of your holdings.

93
00:06:11,860 --> 00:06:16,060
Before entering, Mira rehearses what could go wrong.

94
00:06:16,060 --> 00:06:20,248
First, imagine a sharp market move either way.

95
00:06:20,248 --> 00:06:24,335
Check the whole position's loss and cost to close.

96
00:06:24,335 --> 00:06:28,798
Margin and hedge benefits can change near expiry.

97
00:06:28,798 --> 00:06:33,548
A later expiry hedge may receive different margin treatment.

98
00:06:33,548 --> 00:06:38,272
Check current requirements for your exact complete basket.

99
00:06:38,272 --> 00:06:41,847
Next, imagine the bought hedge order fails.

100
00:06:41,847 --> 00:06:46,572
Filled sold options could be left without intended protection.

101
00:06:46,572 --> 00:06:51,448
Check actual exposure and arrange to reduce or close it.

102
00:06:51,448 --> 00:06:55,722
A partly filled order also changes the quantity held.

103
00:06:55,722 --> 00:06:59,898
Check funding while entering and closing each leg.

104
00:06:59,898 --> 00:07:05,698
An expiry calculator cannot show every funding or execution problem.

105
00:07:05,698 --> 00:07:10,056
Write the answers before placing any real order.

106
00:07:10,756 --> 00:07:15,131
First, margin is not your maximum possible loss.

107
00:07:15,131 --> 00:07:19,218
Mira keeps the deposit and loss pages apart.

108
00:07:19,218 --> 00:07:23,531
Second, check the full position at the actual quantity.

109
00:07:23,531 --> 00:07:27,993
Include costs when comparing loss with your allowance.

110
00:07:27,993 --> 00:07:32,594
If even one lot fails, zero is a valid answer.

111
00:07:32,594 --> 00:07:37,594
Third, check usable cash and whether protection stays intact.

112
00:07:37,594 --> 00:07:42,506
Rehearse failed orders and difficult market moves on paper.

113
00:07:42,506 --> 00:07:46,544
You can keep learning without placing a real trade.

114
00:07:46,544 --> 00:07:50,931
Chapter three compares selling a call and put together.

115
00:07:50,931 --> 00:07:53,556
Do two premiums remove the risk?

116
00:07:53,556 --> 00:07:57,569
Mira takes both sold options to the next desk.

117
00:07:57,569 --> 00:08:01,392
Keep the whole position in view as we continue.