- what is margin money ??? is this also called leverage???
from what I have heard that brokers lend money to traders to buy more stocks - if yes then do they only allow on intraday trades or for other orders like CNC???
- also, are there any qualification criteria to get that margin money???
- can someone explain to me with an example of how profit or loss will affect overall capital when we take margin money??
would really appreciate your response
what is margin money ??? is this also called leverage???
Let me a give you an example to understand what is margin and leverage.
Let say you have 1000 rupees in your account and your thinking to buy SBI. At the moment the share price of SBI is 100 and with your margin amount you can buy 10 shares of SBI
Now broker gives you 5x leverage for SBI so you have 1000 X 5 which means now your value will be 5000 at the moment you can buy 50 shares of SBI instead of 10 as compared to previous ( Here 4000 is borrowed money )
if yes then do they only allow on intraday trades or for other orders like CNC???
You cannot use in CNC
also, are there any qualification criteria to get that margin money???
minimum margin amount is required to buy a share. Now let say the margin amount of sbi is 20% and the price is 100 so you need minimum 20 in your account to buy a single share instead of 100
can someone explain to me with an example of how profit or loss will affect overall capital when we take margin money??
apply this example
SBI your money 1000 with no leverage CNC
Buy Price 1000
Sell Price 1005
Qty 10
Net P&L 38.83
SBI your money 1000 with leverage Intraday
Buy Price 1000
Sell Price 1005
Qty 50
Net P&L 196.12
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from the above example,
I have 1000 rupees in my account
after leverage, it becomes 5000 (4000 borrowed money)
-
for how much time I can keep this 4000??? and what will be the charges to keep this borrowed money???
-
also let’s say that tomorrow I am planning to take a trade with margin money but the trade is not going according to my setup hence I decide not to trade, hence I haven’t used margin money…so now if I give back margin money to a broker without using, so charges will still be applied???
-
also, are there any qualification criteria to get that margin money???
minimum margin amount is required to buy a share. Now let say the margin amount of sbi is 20% and the price is 100 so you need minimum 20 in your account to buy a single share instead of 100
(Plz elaborate on this one it is kind of confusing , if you give example co-realting with 1000 rupees in my account it will be great)
Hi @bansode933
You should note that your account will not become 5000 from 1000 .
you will still have 1000 only , however you will be allowed to trade upto certain amount depending upon the stock you trade via a MIS order .
These orders are to be squared up intraday day .
There is no qualification to get margin money .
https://zerodha.com/margin-calculator/Equity/
Please check this link on how much leverage you will get for each stock .
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Your account wont change from 1000 to 5000 in anyway below you can find the way how it works
Margin available 1000
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SBI 1 Share Price is 218.10 so you plan to buy the share and hold i.e CNC with your margin you can buy 4 shares i.e 218.10 X 4 = 872.4 so your new Margin available will be 1000 - 872.4 = 127.6 ( Here tax not calculated )
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SBI 1 Share Price is 38.30 in intraday and with your margin amount you can buy upto 25 shares i,e 25 X 38.30 = 952.5 so your new Margin available will be 1000 - 952.5 = 47.5 ( Here tax not calculated )
If your are planning to buy 25 shares of SBI in CNC you need 5500 Margin in your account
So the key in CNC you can buy 4 shares only where as MIS ( intraday ) you can able to buy 25 shares with your Margin available amount
For MIS you need to square it off by market closing timings
1 Like
ohhh… now I see how this works
by default zerodha provides us the margin for intraday
thankyou @sathishkumar for explaining it with example
also now I get it way more people are attracted to intraday and fno