Margin, leverage & lot size
Sizing a derivative is a different problem from sizing a cash position, in two ways that both matter.
Lot size
Derivatives trade in lots, not units. A NIFTY option lot is a fixed number of units set by the exchange; you can hold one lot or two, never one and a half.
The platform looks up the lot size for the underlying and instrument, and positions are constrained to whole lots.
The consequence for risk sizing
Your per-trade risk budget resolves to a quantity. Cash equity can hold that quantity almost exactly. One share is a small increment. A derivative cannot.
If one lot's risk exceeds your per-trade budget, the smallest possible position is already too large. There is no fractional lot to fall back to.
The three real options, in order of preference:
- Increase the allocation so one lot fits inside the budget.
- Choose a cheaper instrument, a further-OTM strike, or a smaller-lot underlying.
- Do not take the trade.
What you should not do is take the position and mentally revise the risk budget upward, which is the path of least resistance and the reason lot granularity deserves a warning box.
Cash instruments carry a quantity step instead: whole shares for equity, 0.00001 for crypto spot.
Margin
A futures or short-option position requires margin, a good-faith deposit, rather than the full notional. That is what leverage is, mechanically.
How the platform models it
| Property | State |
|---|---|
| Margin computed | Per leg, on a gross basis |
| Spread or hedge benefit | Not implemented |
| Margin reservation | Implemented, margin is reserved against the strategy's allocation |
| Margin validation | Implemented, an order without sufficient margin is rejected with INSUFFICIENT_MARGIN |
| Live margin authorisation | Blocked; see Derivatives overview |
A bull call spread's real margin requirement is far below the sum of its two legs, because the long leg caps the short leg's loss. The platform does not model that. It reserves margin as if the legs were unrelated.
Two consequences:
- Hedged structures consume more of your allocation than they should. A four-leg iron condor reserves four legs' gross margin. You may not be able to hold a position your broker would happily margin.
- It errs safe. Over-reserving cannot cause a margin shortfall. The direction of the error is the right one, and it is a capability gap rather than a risk.
Leverage is the risk, not the feature
The plain statement:
A margined position can lose more than the margin posted.
A cash equity position's worst case is that the equity goes to zero. A futures position's worst case is bounded by how far the underlying moves, and that is not bounded by your deposit. A written option's worst case, on the call side, is unbounded.
This is the single most important difference between the derivatives path and the cash path, and no amount of risk configuration changes it.
Where the risk gates fit
The nine order gates apply to derivatives orders, plus the margin validator.
Two gates behave differently on derivatives and it is worth knowing how:
per_trade_risk computes stop-distance × quantity. On an option, "quantity" is lots × lot size
and the stop is in premium terms. A percentage stop on a premium is a much larger move than the
same percentage on the underlying, a 25% stop on a ₹120 premium is ₹30 of premium, which the
underlying can cover in a small move.
max_order_value measures notional. For a margined instrument, notional and margin are different
numbers, and the gate reads notional. A cap sized against cash-equity intuition will be tighter than
you expect on futures.
Capital limits
The platform enforces minimum notional and position limits per market, sourced from reference data with fallbacks. On derivatives these interact with lot size: the effective minimum is whichever is larger, the market's minimum notional, or one lot.
Sizing a derivative, in order
- Decide the risk budget in money. Not a percentage, a number.
- Look up the lot size for the instrument.
- Compute one lot's risk at your intended stop, in premium or contract-value terms.
- Compare. If one lot's risk exceeds the budget, go back to the three options above.
- Check margin. One lot's margin must fit inside the strategy's allocation, and the platform reserves it gross with no hedge benefit.
- Check the flat fee. ₹20 per order per leg. A four-leg structure round trip is eight orders. On a one-lot position that may be a significant fraction of the expected outcome.
Limitations
| Limitation | Consequence |
|---|---|
| No spread or hedge margin benefit | Hedged structures reserve gross margin |
| Live margin authorisation blocked | Part of why live entry is refused |
| Lot granularity | Risk sizing cannot always be satisfied |
| Notional-based order-value gate | Reads notional, not margin |
| Margin model is the platform's, not your broker's | Your broker's requirement is authoritative for live |
Next
- Derivatives risk disclosure
- Position sizing, the cash-instrument version
- The nine order gates