Q1 :Can i do option selling ( only intraday ) with only collateral money ?
Q2 : What are consequences of not following the 50:50 rule please explain with an example supposing i have 5 lac as my collateral money ?
Q3 : Reffering to Q1 if am able to do that with any other source than colleteral money , what will happen if i incur losses and do not settle the losses wth cash and unpledge my MF
Yes, you can.
This is not applicable for intraday but for overnight positions. For overnight positions if you are not maintaining minimum 50% margin in cash or cash equivalents, there is interest of 0.035% charged per day on whatever excess non-cash collateral you use.
For example you have 5 lakhs non cash collateral margin and no cash or cash equivalent collateral in your account.
If you take position worth 5 lakhs, 2.5 lakhs has to come from cash or cash equivalents and remaining 2.5 lakhs for non cash collateral.
As you will be using 2.5 lakh non cash collateral in excess, interest of 0.035% will be applied on this.
If you don’t have cash balance in your account and suffer loss, your account will go in debit balance. Since collateral margin cannot be used to settle losses, you will have to add funds to your account. If you fail to add funds, the pledged securities to the extent of debit balance can be squared off. Explained here: Why were the shares I pledged squared off?
Before placing the unpledge request, you must ensure that any negative balance in the trading account is cleared.
@ShubhS9 if i use 100% pledge collateral money – Do i need to place a MIS order in selling options or i can place NRML order but have to sequre off position before 3.30
You can use NRML order too. Since you will be squaring off the position on same day, there won’t be any interest applicable.