So share moves higher, more margins and share moves lower, lower margins; that too on a daily basis, as simple as that ?
Yes, collateral value will change according to price and haircut values of the security.
For overnight hedged positions, margin typically is around 30k for one lot in Nifty.
Is it that 50% of this has to come in cash ? Rest 50% could be collateral, right ?
Respect to all of you present here…
And after going to the above awesome quarries and their solutions… I have a little quarry…
It will be great if any one answers this…
The margin which we get from the plged shares after haircut…and if we use that for taking position in f&o(option writing) and if the trade remains OTM at expiration… It’s mean i am profitable… Then what will happen to my pladge share… Will i get it at the same plaged value or at a value after haircut???
Your replies can make wonders.
Until you unpledge the shares they remain pledged and you can keep using margin received to take other trades.
When you unpledge the shares, the Buy average remains the same as when you bought these shares before pledging, that doesn’t change.
First of all thank you very much sir for your speedy reply… @ShubhS9
Sir i didn’t understand this:sweat_smile:… Please can little elaborate this .
Sir If we keep the shares pledge and use the margin recieved to take trades …then their is no benifits for broker?.. Or is there any?
Did the broker charge any commissions for giving and allowing to keep the margin as long as the client wants…?
Because clients charged only in the time of pledging…
Sir another quarry:-
Let one take a trade (option writting) and is using the margin of the pledge shares… Now at the time of expiry it become slightly ITM and he faces a little loss…which can be covered easily by the margin value… Now the margin available to him is less right because some of it is used to cover the loss…
Your replies can make wonders
Other than the charges you pay while pledging securities, there are no fees charged for using collateral margin.
The losses you face while trading have to be settled with cash, you cannot use collateral margin to settle losses.
If you don’t have cash to cover losses, it will result in your account going in negative balance, on which you will be charged interest of 0.05% per day.
@ShubhS9 Suppose I pledge a share X whose CMP is Rs 100 and got margin of Rs 85 after 15% haircut. Now let’s say after 1 month value of X increased to RS 200 (so do margin to 170) and I decided to unpledge it, how much margin/amount do I have to return? I mean do I have to return anything extra apart from the margin which I got?
The current collateral margin you have will be 170. When you unpledge the shares, same will be debited.
Thanks. One more question suppose I have margin of 50k(sgb)+50k(normal stocks) from pledging and 50k cash. If I take fno position of 1L, which cash will be used first? cash equivalent (sgb) or real cash?
Collateral margin will be used first.
Does margin from pledged securities increase/decrease with raise/fall of share price???
Yes, the collateral margin changes according to price variations in the security.
For intraday option writing, can I use whole of pledged margin or 50% cash rule is applicable to intraday as well.
@samurai Yes, you can use the entire pledge for intraday option writing. The 50:50 is applicable only for overnight F&O positions.
You can check this post for Pledge-related queries.
@ShubhS9 suppose I take a hedged position intraday. Sell an otm nifty option worth 500 and buy an otm nifty option worth 200. the hedged margin comes to around 25k. Now how much of this will be taken from the pledged margin as pledged margin cant be used for option buying. Should I have Rs. 200 in cash and the rest 24.8k will be used from the collateral margin?
Yes, the amount needed to buy options should be available in cash.
No, the option credit can be used to fund the buy option trade if buy premium is less than sell premium.