How does F&O work in India?

[abcd5662]

@nithin

She works at Accel and had emailed me these queries. Coincidentally I wanted to write on this topic with all the noise around how derivative trading is growing and equity dropping. So I requested her to post the query here so that the discussion is helpful for the community.

This then explains the unusualness of the thread . From what I remember, it took me a few weeks before I was able to tag users on the forum.
With the detailed & prompt responses, for a moment I thought this being a planted set of questions (which it is, technically😋).

But for what it’s worth, it’s so nice of you to be responding to all our queries here. I think tqna is one of the most important cog in the trust wheel that Zerodha has built over the years. You being so active here is such an assuring feeling.

[Chetan_Nahata]

So pledging gives you interest free loan against your securities that you can only use to trade … and as long as you’re profitable it’ll work in your Favour??
Is there any repayment time or it is for infinite period?

[Chirag1]

There is no finite time. Once you pledge, extra margin is available until you unpledge.

Its all explained in the article below and the links in them.

Margin can be used for intra-day trading in EQ, selling options, trading Futures etc because you just have to put up the security.
Its the P&L that you need to settle in their appropriate time.
Incase there is shortfall when you need to settle MTM/PnL and you dont have sufficient cash, then there is Margin penalty applicable.
Also, read about 50:50 cash equivalent collateral for overnight positions.

What is pledging, and how does it work? (zerodha.com)

[nithin]

@Nilay_Shah

Hi Sir, I Have One Confusion Regarding Nomination,
I Have Heard That In Trading Account, Nomination Getting Compulsory Like In Demat…Is It So ?

Reason Behind Asking Is I Found Its Illogical As Trading Account Is Only For Trading, Not For Holding Of Any Shares, Bond…So Pls Update Us On This…

Hmm… no, there is no nomination for trading account. If there are any unutilized funds and no trades in the account, it gets transferred tot the bank account in 30 days. Whatever is the nomination in the bank account is what will work for those funds.

[nithin]

@abcd5662

This then explains the unusualness of the thread . From what I remember, it took me a few weeks before I was able to tag users on the forum.

Ah, wait, it shouldn’t take you weeks to tag users.

@Meher_Smaran, can you check if any settings on Discourse needs to be changed.

[Nilay_Shah]

Thank You Sir Ji For Responding On Nomination Query…
Last Point Want To Ask Is NSE Circular Mentioning Trading Account Too
For Reference, Attaching NSE Circular Image
So Requesting You To Guide Us Once Again…

[nithin]

@Nilay_Shah

Thank You Sir Ji For Responding On Nomination Query…
Last Point Want To Ask Is NSE Circular Mentioning Trading Account Too
For Reference, Attaching NSE Circular Image
So Requesting You To Guide Us Once Again…

Ah yeah, @VenuMadhav corrected me and I was supposed to respond here. Ideally the nomination on trading account shouldn’t matter as the money anyways goes back to the bank account in 30 days. But yeah, in case before those 30 days if nominee reaches out, I guess we will in future have to settle funds to the nominee.

[Modifan]

That is a fantastic read. Well researched.