# How is free cash available for delivery-based trading calculated during market hours if I trade Futures and Options and also have collateral margin?
**URL:** https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337
**Category:** Zerodha trivia
**Created:** [August 7, 2017, 1:23pm UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337 "2017-08-07T13:23:31Z")
**Posts on this page:** 16
**Page:** 1
### Author:  [@Tintin](https://tradingqna.com/u/Tintin)
#### Post date: [August 7, 2017, 1:23pm UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/1 "2017-08-07T13:23:31Z")
Explain in all the available scenarios.
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### Author:  [@BharatW](https://tradingqna.com/u/BharatW)
#### Post date: [August 7, 2017, 1:23pm UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/2 "2017-08-07T13:23:48Z")
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### Author:  [@BharatW](https://tradingqna.com/u/BharatW)
#### Post date: [August 7, 2017, 2:54pm UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/3 "2017-08-07T14:54:37Z")
Let’s put down a few pointers before we start:
1. The margin for trading F&O is blocked from Collateral margin(margin received from pledging shares) during trading hours.
2. At the end of the day, the margin is split equally between free cash and margin.
(If 50% of the money is unavailable in free cash, then your free cash goes into negative and the shortage in free cash is utilized from collateral itself).
3. The premium received on option selling is added to free cash.
4. Unrealized loss is taken collateral margin, realized loss and realized profit is netted from you free cash.
5. Unrealized profit is not added to free cash.
You can take a delivery-based trade with whatever is the free cash in your account at any given point in time.
Let’s take examples for each of the above points and calculate the free cash in the account at different scenarios:
You have Free cash = Rs.1 lac and Collateral margin = Rs.5 lacs.
1. On Day 1, you take a Normal future position which requires a margin of Rs.1 lac. During trading hours, the amount of 1 lac is blocked from collateral margin only.
Now, Free cash = Rs.1 lac and Collateral margin = Rs.4 lacs.
2. At the end of the trading day, this margin amount gets split 50-50 between free cash and collateral.
Now, Free cash = Rs.50k and Collateral margin = Rs.4.5 lacs.
3. Let’s assume you ended the first day with no profit/loss.
Now on Day 2, you take an option short position which requires a margin of Rs.1 lakh for which you receive a premium of 20k. The entire margin of Rs.1 lac gets blocked from the Collateral margin and 20k gets added to free cash.
Now, Free cash = Rs.70k and Collateral margin = Rs.3.5 lacs
4. You also complete an intraday trade with a realized profit of Rs.5k. This gets added to free cash.
Now, free cash = Rs.75k and Collateral margin = Rs.3.5 lacs
5. Let’s assume your carried future position is at an unrealized loss of Rs.10k. This gets subtracted from collateral.
Now, your free cash = Rs.75k and Collateral margin = Rs.3.4 lacs
To buy shares for delivery, you now have Rs.75k of free cash. Assume you buy stocks worth 50k.
Now, your free cash = Rs.25k and Collateral margin = Rs.3.4 lacs
At the end of Day 2, the margin for the day(which was completely blocked from collateral) is now split 50-50 between free cash and collateral.
So, for Day 3, Free cash = Rs. -25k and Collateral margin = Rs.3.9 lacs.
You’ll be charged an interest of 0.05%/day on this debit amount in the free cash until it’s cleared. You can continue to do margin trading with the money available in Collateral margin.
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### Author:  [@BharatW](https://tradingqna.com/u/BharatW)
#### Post date: [August 7, 2017, 2:58pm UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/4 "2017-08-07T14:58:50Z")
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### Author:  [@curiousvi](https://tradingqna.com/u/curiousvi)
#### Post date: [July 1, 2020, 5:35am UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/5 "2020-07-01T05:35:07Z")
> [@BharatW](#):
>
> If 50% of the money is unavailable in free cash, then your free cash goes into negative and the shortage in free cash is utilized from collateral itself).
So if 50% free cash is not available - what is the penalty ? and that penalty is from exchange or from Zerodha? and I believe until that negative balance is clear by adding more cash …there will be interest charged per day if yes how much interest?
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### Author:  [@ShubhS9](https://tradingqna.com/u/ShubhS9)
#### Post date: [July 1, 2020, 5:49am UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/6 "2020-07-01T05:49:46Z")
> [@curiousvi](#):
>
> what is the penalty ? and that penalty is from exchange or from Zerodha?
Penalty is charged by exchange and charge varies from 0.5% to 1%, refer to [this article](https://support.zerodha.com/category/trading-and-markets/trading-faqs/articles/what-is-margin-penalty-and-how-does-it-work) for more.
> [@curiousvi](#):
>
> …there will be interest charged per day if yes how much interest?
The interest charged by Zerodha for negative balance is 0.05% per day.
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### Author:  [@curiousvi](https://tradingqna.com/u/curiousvi)
#### Post date: [July 1, 2020, 6:46am UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/7 "2020-07-01T06:46:05Z")
> [@ShubhS9](#):
>
> Penalty is charged by exchange and charge varies from 0.5% to 1%, refer to [this article](https://support.zerodha.com/category/trading-and-markets/trading-faqs/articles/what-is-margin-penalty-and-how-does-it-work) for more.
I checked that article and it does not say anything about 50% cash is required …it only says about shortfall margin penalty. Can you please enlighten me?
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### Author:  [@ShubhS9](https://tradingqna.com/u/ShubhS9)
#### Post date: [July 1, 2020, 7:03am UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/8 "2020-07-01T07:03:45Z")
> **Exchanges stipulate that for overnight F&O positions, 50% of the margin needs to compulsorily come in cash and the remaining 50% can be in terms of collateral margin.**
It is mentioned in [this article](https://support.zerodha.com/category/console/portfolio/articles/what-is-pledging).
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### Author:  [@curiousvi](https://tradingqna.com/u/curiousvi)
#### Post date: [July 1, 2020, 7:05am UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/9 "2020-07-01T07:05:24Z")
I know but its an article by a zerodha employee - it does not mean exchange want 50:50 ratio at client level …exchange want it at broker level …i.e. broker has to maintain that ratio with exchange. Zerodha says - oh exchange want it from client. (misinterpretation)
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### Author:  [@ShubhS9](https://tradingqna.com/u/ShubhS9)
#### Post date: [July 1, 2020, 7:08am UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/10 "2020-07-01T07:08:16Z")
> [@Requirement for 50:50 Cash & Collateral](https://tradingqna.com/t/requirement-for-50-50-cash-collateral/66248/2):
>
> This is an Exchange requirement, not Zerodha’s. Here’s the [link](https://www.nseindia.com/products/content/derivatives/equities/margins.htm) Search for ‘Effective Deposits’ on the above page: At least 50% of the Effective Deposits should be in the form of cash. I wouldn’t be able to comment on policies of other brokers, they could be blocking their own cash margins to allow you to take positions. As I said earlier, its not our policy, its the Exchange’s policy.
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### Author:  [@curiousvi](https://tradingqna.com/u/curiousvi)
#### Post date: [July 1, 2020, 7:13am UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/11 "2020-07-01T07:13:03Z")
> [@ShubhS9](#):
>
> I wouldn’t be able to comment on policies of other brokers, they could be blocking their own cash margins to allow you to take positions.
Are you working for Zerodha ? did you even read your own message…read above again. It says I would not be able comment of other brokers polices …that means if it was required by exchange than every broker has to follow the rule and would be asking clients to maintain that 50:50 ratio.
Here is copy/paste from exchange website -
**Effective deposits**
**All collateral deposits made by CMs are segregated into cash component and non-cash component.**
**For Additional Base Capital, cash component means cash, bank guarantee, fixed deposit receipts, T-bills and dated government securities. Non-cash component shall mean all other forms of collateral deposits like deposit of approved demat securities.**
**At least 50% of the Effective Deposits should be in the form of cash.**
Where does it say client has to maintain that ratio …it says CM - means clearing member.
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### Author:  [@Tushar\_Khandelwal](https://tradingqna.com/u/Tushar_Khandelwal)
#### Post date: [April 12, 2021, 1:28pm UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/12 "2021-04-12T13:28:18Z")
Hello Bharat
Very well Explained brother, please clear one more doupt as I can see in my Zerodha kite ( Cash + Collateral) = 1.5 Lakh, then how I come to know which amount is of cash and which of collateral, As I see in Funds it shows amount of Collateral but doesn’t have any column for Free cash or cash amount basically I am not able to track that …I already crossed 50% cash limit or not, Can you please solve my query.
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### Author:  [@ShubhS9](https://tradingqna.com/u/ShubhS9)
#### Post date: [April 12, 2021, 1:36pm UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/13 "2021-04-12T13:36:03Z")
> [@Tushar\_Khandelwal](#):
>
> how I come to know which amount is of cash and which of collateral
You can refer to the below marked fields to know Available Cash and Total Collateral Margin in your account:
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### Author:  [@Tushar\_Khandelwal](https://tradingqna.com/u/Tushar_Khandelwal)
#### Post date: [April 12, 2021, 2:10pm UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/14 "2021-04-12T14:10:29Z")
Thanks for quick response Shubh, So if available cash is showing approx 20k that means my 50% cash balance is still there and no interest will be charged but as I go in withdrawn funds it shows me negative value, it doesn’t means that my cash balance is negative.
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### Author:  [@Tushar\_Khandelwal](https://tradingqna.com/u/Tushar_Khandelwal)
#### Post date: [April 13, 2021, 6:33pm UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/15 "2021-04-13T18:33:05Z")
Hello Shubh
Kindly respond if you have knowledge about this, looking forward for your response.
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### Author:  [@ShubhS9](https://tradingqna.com/u/ShubhS9)
#### Post date: [April 14, 2021, 1:43am UTC](https://tradingqna.com/t/how-is-free-cash-available-for-delivery-based-trading-calculated-during-market-hours-if-i-trade-futures-and-options-and-also-have-collateral-margin/18337/16 "2021-04-14T01:43:35Z")
> [@Tushar\_Khandelwal](#):
>
> I go in withdrawn funds it shows me negative value, it doesn’t means that my cash balance is negative.
This post should help you clear your doubts: [Funds Withdrawal - #10 by VenuMadhav](https://tradingqna.com/t/funds-withdrawal/37443/10)