Two numbers decide how much money an option trade needs: the lot size, which fixes how many units one contract covers, and the margin, which is the money the exchange requires you to keep aside as a guarantee. They work very differently for buyers and sellers, and misunderstanding them is behind many beginner surprises, from "insufficient funds" messages to positions being closed by the broker.
What a lot is
You cannot buy one unit of a NIFTY option. Options trade in lots, also called the contract size or market lot. If the NIFTY lot is 75 units, one lot of a call quoted at ₹100 costs 100 × 75 = ₹7,500, and every 1-point change in the premium changes your profit or loss by ₹75.
Lot sizes are set by the exchange under SEBI rules so that each contract is worth at least a minimum amount (the contract value is the underlying price times the lot size). SEBI raised that minimum in late 2024. As prices rise and fall, exchanges revise lot sizes, usually twice a year, and stock lot sizes are set stock by stock. Because these numbers change, every figure in this guide is an example; check the current lot size on NSE, BSE or MCX before trading.
| Underlying (example) | Price | Example lot | Contract value |
|---|---|---|---|
| NIFTY | 25,000 | 75 | ₹18.75 lakh |
| BANKNIFTY | 56,000 | 35 | ₹19.6 lakh |
| A ₹1,400 stock | 1,400 | 500 | ₹7 lakh |
The contract value matters because it is your real exposure. One lot of NIFTY moves like roughly ₹19 lakh of the index, even though the option itself may cost only a few thousand rupees.
When a lot size is revised, existing contracts usually keep their old size until they expire, and only new expiries use the new one. For a short while the chain can show two lot sizes for different expiries of the same index. Check the contract details for the exact expiry you trade, especially when rolling a position from one month to the next.
How much an option buyer pays
A buyer pays the full premium up front:
Money needed to buy = premium × lot size × number of lots (+ charges)
That is the maximum the buyer can lose, so the exchange asks for nothing more. Buying two lots of the NIFTY 25,100 call at ₹90 with a lot of 75 costs 90 × 75 × 2 = ₹13,500 plus brokerage and taxes. If you are unsure what charges apply, the trading costs guide lists them.
Why option sellers need margin
A seller receives the premium but takes on a loss that can be many times larger. To make sure the seller can pay, the exchange's clearing corporation requires a margin, blocked in the seller's account for as long as the position is open. It has two main parts:
- SPAN margin: an estimate of the worst one-day loss across a range of price and volatility scenarios.
- Exposure margin: an extra buffer on top, a percentage of the contract value.
Additional margins can apply near expiry, on volatile days or on short options on expiry day, and brokers may ask for more than the exchange minimum. The premium you receive is usually counted towards your margin, but it does not cover it.
A worked example: buyer, naked seller and hedged seller
NIFTY is at 25,000. The figures below are rough illustrations; use your broker's margin calculator for real numbers.
| Position (one lot, 75 units) | Premium | Money blocked (approx.) | Maximum loss |
|---|---|---|---|
| Buy 25,000 call at ₹140 | Pay ₹10,500 | ₹10,500 | ₹10,500 |
| Sell 25,000 call at ₹140 | Receive ₹10,500 | Often well over ₹1 lakh | No fixed limit |
| Sell 25,000 call, buy 25,300 call at ₹35 | Net receive ₹7,875 | Much lower, often a few tens of thousands | (300 − 105) × 75 = ₹14,625 |
The third row is a spread. Buying the 25,300 call caps the seller's loss, so the margin system recognises the lower risk and asks for far less money. This is why many sellers trade spreads and iron condors rather than naked options. The spread guides explain how they work.
See what one lot is worth today
Use the live chain to turn premiums into rupees. Here is the BANKNIFTY chain around the current price:
Pick a premium and multiply it by the current BANKNIFTY lot size from NSE: that is what one lot costs a buyer. Then multiply BANKNIFTY's price by the lot size to see the contract value a seller is exposed to. The gap between those two numbers is the leverage in options, in both directions.
Margin calls and mark-to-market
Margins are recalculated during the day. If the market moves against a seller, the required margin rises and the loss on the position is debited. If the account does not have enough money, the broker can ask for more funds (a margin call) or close the position, sometimes at a bad price. Buyers do not face margin calls, because their maximum loss has already been paid.
The money is blocked from the moment the order is placed. A seller with exactly the required margin cannot add another position, and a sudden rise in the margin rate can leave the account short even if the position has not lost money.
Two practical points: keep a buffer above the minimum margin, and remember that margin can jump on volatile days just when the position is losing. The position sizing guide explains how to decide how many lots your capital can support.
Leverage: the double edge of lots
Lots make small premiums control large exposures. A NIFTY call costing ₹10,500 moves with about ₹9 lakh of index exposure at an ATM delta of 0.5. A 1% NIFTY move (250 points) changes its value by about ₹9,375: almost 90% of what was paid. That leverage is why options can double quickly and why they can go to zero just as quickly. For sellers, the same leverage means a few bad days can wipe out the margin.
The strategy builder shows the payoff, maximum profit and maximum loss for any combination of options, which is a good way to see the risk before placing a trade.
Common mistakes
- Using an old lot size. Lot sizes change; always check the current figure on the exchange before sizing a trade.
- Treating the margin as the risk. The margin is a guarantee, not a limit. A naked seller can lose more than the margin blocked.
- Closing the hedge first. Exiting the bought leg of a spread before the sold leg can trigger a sudden jump in margin.
- Sizing by the premium alone. Ten cheap lots of a far option still carry ten lots of exposure if the price runs.
- Holding stock options into expiry. Physically settled positions can need the full value of the shares, far more than any margin.