Pledge related questions

General
66

Hello,

But the pledged shares never really left a clients demat.

Then how come the Holdings will show different Stock Exchange from which it had originally been bought?

67

The shares in your Demat account don’t have any exchange mapped to them. Kite holdings reflect the exchange price where the previous closing was higher. Explained in detail here.

68

Ok Thanks!
Just two follow up.

  1. Most of this thread seems to revolve around accounting(maybe… :face_with_monocle:) (which i am completely oblivious to btw). I want to learn as to how to differentiate between these :
    • Free Cash
    • Cash Collateral
    • Stock Collateral
    • Total available margins
    • Withdrawable Cash
    • and many more that i might be currently unaware of…

They are quite confusing. Any good resource you might suggest?

  1. Is it at discretion of the Clearing Corporations to tell Zerodha “Hey Zerodha, i see that ‘Client1D123’ has just pledged Q qty of ABC Scrips through you, now i will make a record of this pledge in your TMCM now he is entitled to additional Rs X margins, take this Rs X which i am giving you, go give that to him so he can trade with it…”. (Sorry for the layman terms, its because i can ONLY understand in them! Just trying to understand the flow…)

Best :slight_smile:

69

@ShubhS9 I have one point… While pledging OTP authorization is needed, that seems safe… But while unpledging same doesn’t happens… Doesn’t this leaves loophole in security… How revoking POA can affect it… ?

70

You can refer to this support article which explains it in detail.

To understand about withdrawable balance, you can refer to this support article.

Didn’t get your second query :slightly_smiling_face: can you elaborate?

1 Like
71

First of all thanks for the links to the supporting articles, they definitely geared me in a right direction!

Kindly allow me to explain what my current thinking is with a scenario to elaborate on point 2:

  • On Day 1
    • At 9:30 AM : Lets say i have a total of INR 300k worth of holdings(in my demat) and INR 100k cash which i deposited as Pay-In.
    • At 3:00 PM I pledge my entire holding (Assumption : All the shares are approved by exchange to be pledged) before 4 PM. Since margin received from pledging is market linked, and say my holding value went down that day, hence that 300k became 280k by Day 1 End of Trading Day.
    • I didnt take any trade on Day 1. Just pledged.
  • On Day 2 :
    • After making haircuts on each scrip as applicable on Day 1, lets say Margin which i received in trading account was INR 250k for Day 2. So total money which i can trade with now is 250k + 100k = 350k.
    • I understand from this article - para 4 that zerodha will re-pledge the scrips to clearing corporations once i have pledged them to obtain the margins. The obtain word is confusing, obtained from whom?
    • Who is giving me that 250k? Did zerodha transfer(gave me a loan with no interest except pledging charges) to my trading account using my pledged scrips as collateral? Or did Clearing Corporation transfer this amount to me using my pledged scrip as collateral?
1 Like
72

@ShubhS9 any idea about the above query?

73

@ShubhS9 can i sell my shares immediately after unpledging ?

74

if you place a unpledge request before cut-off time, shares will be available for trading the next day. More details here.

1 Like
75

@ShubhS9 Hello sir. I had a doubt. On Zerodha site, it is mentioned that you need 50% margin in cash for OVERNIGHT position.

Does this mean I can sell options in intraday only with collateral margin and use cash for MTM loss to avoid penalty.

For example, Nifty short straddle requires 1.4 Lacs, will I need 70k in cash or pledging will suffice ?
Thanks in advance

1 Like
76

Minimum 50% margin has to come in cash or equivalent and remaining can come from collateral margin.

77

But I am going to do intraday short straddle and there will be no overnight position. 50-50 rule is for overnight.
Also here is what you posted in July 2020-Pledge related questions - #15 by ShubhS9

78

@ShubhS9 I had one more doubt- does the value of pledge margin change at end of day, morning 9:15 or every second.
I am ensuring I have even collateral margin even if the pledges shares dip but just wanted to check

79

The collateral margin will be adjusted for the price variations in the security at the end of each trading day.

1 Like
80

@ShubhS9
Hello sir. For options buying, we cannot use collateral margin right ?
If that is the case can we put some cash to hedge our position for margin benefit

image
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I have taken this example. Can I execute the basket order 1 without any problem as option buying margin is only 1620+1732=3352

81

Yes, you can as you have sufficient cash available to buy options.

82

Thanks sir

83

@ShubhS9 Also I had one more doubt sir. How far will zerodha allow me to buy the OTM options as I had heard they don’t allow very far. Is there any % range ?

84

You can check the allowed range here and if the option you’re trying to buy, you’ll see a nudge on order window mentioning the range.

Also, if you hold a short option position, you can buy any option outside the allowed range to the extent of quantity shorted.

85

Thanks a lot sir