Hello , I have one doubt. Can we use pledge margin for positional trades. For example bull put spread?
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As per regulations, 50% of the margins blocked for overnight derivative positions has to come in the form of cash or cash equivalent. The other 50% of the margin requirement can come from other non-cash equivalent collateral margins (margins received by pledging liquid funds are considered cash equivalent).
Exchanges stipulate that for overnight F&O positions, 50% of the margin needs to compulsorily come in cash or cash equivalent collateral, and the remaining 50% can be in terms of non-cash collateral margin .
If you don’t have sufficient cash margin and the shortfall is funded by non-cash collateral, there will be a delayed payment charge of 0.035% per day or 12.775% p.a on the shortfall in the cash margin requirement. Read more about the delayed payment (interest) charges here .
So, if you take positions that require a margin of Rs 1 lakh, you will need at least Rs 50,000 in cash irrespective of how much collateral margin you have. Assuming you don’t have this Rs 50,000, whatever you are short by will be the debit balance for the day, and delayed payment (interest) charges will be applicable for that amount.
Excerpt taken from