What is MIS Margin, its charges, how it works and is it different from Margin Trading Funding (MTF) ?
mis is a facility offered by brokers like zerodha etc. for intraday trading. it allows us/customers to take larger positions than their available funds by leveraging a certain percentage of margin. so we can buy or sell more shares within the same day, aiming to profit from short-term price movements. charges vary based on the broker’s policies - you can google. select mis option while placing an order. an example is like, with 10x leverage, 10,000/- can take positions worth 100,000/-.
but all mis positions need to be squared off before the market closes on the same day (equity 3.20pm, delivery 3.25). if not, the broker’s system will automatically square off your positions. this limits risk to intraday price movements but magnifies potential returns and losses due to leverage.
mtf allows traders to carry forward leveraged positions beyond the trading day, borrowing funds from the broker to purchase securities and hold them for a longer period, typically up to a few months. mtf charges include interest on the borrowed amount, which is usually higher than mis due to the longer holding period, and possibly maintenance fees. traders opt for mtf when placing an order to take larger positions.
unlike mis, mtf positions are not automatically squared off at the end of the trading day. traders can hold these positions as long as they meet the required margin. the borrowed amount accrues interest, and traders need to meet margin calls if the value of the securities falls. zerodha does not provide mtf facility (as of now).
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