@siva @ShubhS9
When I use collateral to buy options my Available Cash shows in the negative though my MTM is currently positive.
How is this treated bcos options have been bought with collateral though no Loss in the position but this should not create a margin call as negative cash is only due to options bought with collateral and not Cash.
Can you feedback asap as my positions are live now?
As expected I receive - “Important — Debit balance in the trading account” -
Then what is the point of allowing buying options with collateral (with liquid or stock) which will surely result in Debit in Cash - really don’t understand.
Is this only applicable for Intraday option buying & not carry forward?
Can you update asap?
I believe even intraday negative balance is charged.
If you buy options and carry forward using collateral, the next day, your cash margin will be negative. We will send the notification for the alert, as delayed payment charges of 0.05% per day (â‚ą50 per lakh) or 18% per annum will be applied to your negative cash margin. Your position will not be squared off for this.
Believe this should not be treated on par with MTM margin call bcos the message says
“Failure to do so would lead to your pledged (collateral) stocks being sold to make good the debit. A debit balance could also lead to interest of 0.05% per day or 18% per annum being charged on the debit amount.”
@Ragavendran_M
Also pls confirm whether pledged collateral will be sold for the debit? - Bcos there is no point in using this facility if we risk all such things.
Then clearly mention this while placing order when buy orders are placed with collateral instead of cash.
@Ragavendran_M @ShubhS9 @siva - Could you pls update for the above as I need to take decision for my live positions
No charges for intraday negative balance with us.
Questions
I have funded 70% of my option buying with sold options (multi leg strategy) & the remaining 30% with collateral (Liquid Bees) and zero absolute Cash. I have 5 times the margin in total collateral for this entire trade so no issues wrt to margin.
So how this debit balance(no MTM loss as of now only option buy debit) will be handled wrt pledged collateral sell off?
“If your account has a debit balance for four consecutive trading days, you will not be allowed to buy options using collateral margin from the fifth trading day.”
So will you be able to carry fwd the existing trade as explained in Point 1 without any issues(no square off and with no pledged collateral sell off for debit balance) and keep it in running but only point additional options buying is not allowed from Day 5.
“You must maintain sufficient funds in your Zerodha account to cover any losses. Without enough funds, you’ll need to deposit money, or the position might be squared off, or the pledged stock will be sold at RMS’ discretion.”
This is for MTM losses which is applicable to all scenarios and nothing specific to this case rt?
If your account has a negative cash balance due to options purchases using collateral margin, we may liquidate pledged shares to cover the debit balance. This action will be taken if your risk level (debt) exceeds 50-70% of your collateral value. We will notify you before selling your pledged securities.
Yes ,You cant able to take fresh trade until you clear your debt balance.
If you have positions in options short or futures that require exchange margin, it’s crucial to maintain the required margin. Failure to do so may result in your position being squared off to avoid an exchange margin shortfall penalty. However, if you hold long options, we will not square off those positions.
As I already quoted I have 5 times the margin for the entire trade let alone the debit due to buy positions - So I don’t see that risk you mentioned (50-70%) in my positions - But this debit negative cash balance will remain for the entire duration of the trade which shld not cause any issues rt?
Also if I am notified before selling my pledged securities what is the time window I have to take action myself to square off the positions to avoid such an action?
Should not be any issue but as mentioned above after 4 trading days of consecutive negative balance in account no new fresh option buy trades are allowed. Also you will end up paying interest charges for negative balance.
@Zahid Can you reply this.
If your negative debt balance exceeds 50-70% of your total collateral, we may sell your pledged securities to cover the debt. We will proceed with this action as soon as possible, based on your risk level.
Believe you have not answered the question - After notification how long is time window before you sell the securities to address the debit balance? @Zahid
It varies. Typically, we give a week . However, if your collateral value decreases and the risk rises, we may need to take action sooner at any time . While it’s difficult to specify an exact timeline, we will ensure to communicate with you before selling your pledged holdings.
Sure. I just need a couple of hours to take a call and square off positions.
And this communication will be app messaging, email & also calls - all three modes rt?
Email & SMS , Calls and Voice blast on the day of selling the pledged securities.
