Currency Futures GBP bought at Rs 100
At what price will the contract will be sold if I dont put any stop loss
Depends on how much margins you’ve maintained with your broker. If you have sufficient margins, the broker can allow you to keep the position maximum until expiry.
Technically all brokers are required to collect from clients a certain sum of money called “Initial margins” for any F&O position the client’s entering into.
Let me give you an example:
For all Futures trading, you have to keep a certain amount of margin with your broker. So if you want to buy 1 lot of GBP-INR Futures, you have to keep a margin of Rs.2500 per lot. Assume you bought this at a price of Rs.100.
If you start making losses on this position, your margins kept with the broker keeps reducing. So if GBP-INR goes to 99, you’d have lost Rs.1000 (400 ticks*2.5 per tick) which means that your margin money will reduce to Rs.1500. The broker can either ask you to bring in more margins to allow you to hold the position or may square off (sell) your position due to lack of margins. Assuming you had a lac in your account and entered into such GBP-INR trade, he would have allowed you to hold such position till expiry cos you would then always have sufficient margins regardless of what price it went to.
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Thank you very much for the answer it was really helpful and 1 last question
Does the broker automatically directly deduct from the available funds or do we have to notify him.
No need to notify, Broker will automatically block margins towards whatever positions you’ve taken.