If sufficient limits are allocated to the F&O segment, margin shortfall does not occur, because the system utilizes the margin requirement from the allocated F&O limits.

However, a margin shortfall may occur even if the funds are available in the linked bank account, as bank balance is not automatically considered for F&O margin requirements.

For F&O trading, margin allocation may be done in the form of:

• Cash, or
• Pledged SAM (Shares as Margin)

Here are some common reasons why your F&O positions may get squared off:

1. Margin Calls/Shortfall:

If your available funds are not sufficient to meet the losses (MTM) on your position, the system may square-off your position to stop further losses.

• You can check your trigger price under open position tab and also click on three dots and add your funds to avoid square-off

Additionally:

a.)     As expiry approaches, there is an increase in margin requirements. For short index options, an additional 2% ELM is required on the expiry day

b.)    Calendar spread hedge benefit is also removed.

c.)     On Expiry-4 days , additional physical delivery margin is required for long stock options.

2. Value of Collateral

If the value of the collateral available in allocated segment have insufficient margin requirement.

Example: You pledged shares worth ₹5,00,000 and you have utilized limits generated on pledged shares to trade in F&O

• The value of shares becomes ₹4,00,000.

• Required margin becomes ₹4,50,000
• Available margin is only ₹4,00,000
• Shortfall of ₹50,000 

If funds are not added, position will be squared off.

3. Expiry Settlement

• Index options like Nifty and Bank Nifty are settled on expiry.
• ITM options are cash settled, while OTM options expire worthless.
• Stock options require physical delivery, which needs high margins. If sufficient margins are not available, the broker may square off the position before expiry.

You can opt for one of the options given below –

• Rollover your position to next month’s contracts (for Futures contract only) till 2:30 pm on the expiry day .
• Square-off your open positions in near month contracts before expiry till cutoff time. ICICI Securities runs the End of Settlement Square-off process for Options at 12:00 pm & remaining F&O positions at 2:30 pm to close all open positions on best effort basis prior to Expiry.
• In case you have a stock option position and have selected “Choose Non-Delivery” then such positions will be squared off in the EOS process before the expiry of such contracts. All Long Stock Options will be auto squared-off at 12 PM and the remaining F&O positions at 2:30 PM.

4. Stock in Ban

If you have a position in a banned stock:

• You will be allowed to square off your existing positions during the Ban Period. However, if one leg of the hedged position is squared off, it can lead to increase in Future Equivalent OI, which further leads to system sqaure off.
• If the trade is squared- off by the client or the system, it would result in an increase in Future Equivalent OI during the day. This in turn would lead a cancellation of your pending square-off orders and the positions will be squared off any time after 2 PM to reduce the Future Equity OI.

5. If you trade in Intraday products like Execution Algos &Option plus

• If you do not close or convert your intraday F&O position before the broker’s cut-off time (usually around 3:15 PM), the system automatically squares it off.

How to Avoid Auto Square-Off:

• Keep enough funds in your account in the F&O allocation segment, especially close to the expiry date.
• Regularly monitor your MTM profit and loss.
• Carry-forward your intraday F&O positions before the cut-off time.