Margin for Arbitrage Trading

  1. I have a stock worth of 10lak and I got collateral margin from Zerodha i.e Rs.6,00,000/-(after 40% hair cut) and I have Rs.2lak free cash in my account.
  2. Let say I want to buy SBI equity [email protected] and SBI one lot sold @1770 and my risk level is 10points.  Do I get any margin benefit for my trade? If not why?
  3. If I use Spread order entry(2 Leg) do i get any margin benefit?

Firstly Chandu, you cannot use collateral margin that you get from pledging stocks, to buy more stocks. Such a margin can be used only for trading derivatives. So you cannot pledge SBI and use it to buy more SBI.

Assuming you are taking this trade normally that is you have around Rs 2.5lks and you buy 125 shares at 1760 and sell 1 lot futures @1770, there is no margin benefit you get out of this. If you want any margin benefit, you will need to first buy the stocks, pledge it and then use the margin from pledging to sell 1 lot of SBI [email protected]. This would not really be an arbitrage, because to buy, get delivery and then pledge, will take 2 days atleast and until the stock could have moved up/down.

Yes spread order can be used to enter into this position, but there is no margin benefit because you enter through a spread order window.

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