What is the best option for 50% cash margin required?

For FNO position margin - 50% has to come from cash - So instead of using real cash what is the best option ?

I read somewhere there are 2 options - liquid funds and liquid ETF - is there any other option?

I also read that liquid funds give more return compared to liquid ETF - please correct me if am wrong.

And if I have option selling position overnight - does the margin requirement changes frequently during day?

For options position where there is M2M loss - I have to add more cash ? and do I have add more margin if there position require more margin ?

Unfortunately margin sheet does not come before 12 at night so one can not transfer more funds to avoid margin penalty so what is the solution?

@siva @ShubhS9 @Prayag

3 Likes

following…

Here is list of securities which are considered as cash equivalent.

Here’s a comparison between Liquid Funds and ETF’s: Liquid funds vs. Liquid ETF/Overnight Funds

Margin requirement depends on price and volatility of the security. Also, if your Option position is in loss, your margin requirement will increase as losses are marked to market and deducted actively from your available margin.

In case you don’t have sufficient margins, you’ll have to add more funds to ensure your position isn’t squared-off.

@Siva can you.

So for option position - m2m deducted from available margin so for options it will not go in to debit balance correct? But it will potentially will go for margin penalty (if client does not add funds before end of the day)

But what about future m2m loss - if am not wrong future m2m loss will go for debit balance as it will not adjust against margin …correct? that means for future client has to take care of both m2m loss (by adding more funds) and also has to take care of potential margin penalty ?

Essentially for options only one problem to take care of …i.e. margin penalty and for futures both problems to take care …m2m loss and margin penalty.?

When you’re making loss and margin requirement increases, if you don’t have sufficient margins, your account will result in debit balance.

You’ll receive a margin call in such cases, after which you’ll have to add funds. Failing to do so, RMS can square-off your position.

Right. Profit / Loss in Futures in settled daily and credited to / debited from your account. If you don’t have sufficient cash to settle your loss, this will result in debt balance.

Margin penalty is applicable if you aren’t maintaining sufficient SPAN + Exposure margin.

Maintain minimum 10% free cash all the times to act as buffer when there is sudden change in price or increase in volatility. This is one of the rule proposed by many successful traders in their trading plan and to succeed in long term.

2 Likes

I use one of the money market fund instead of liquid fund or liquid ETF. Liquid fund invests in securities with maturity upto 90 days but money market fund invests in securities with maturity upto 12 months. With higher duration it’s subjected to relatively higher volatility and higher return compared to liquid fund.

1 Like

Can we confirm our account is not in negative balance by checking KITE balance by 5pm or even after 5pm account balance can go in negative? What’s the cut-off time?

If the balance is in negative, then what’s the cut off time to add cash to the account in order to avoid negative balance penalty?

1 Like

Most of the times by 4.30pm your kite balance should have updated margin as we upload new span margin file by 4pm. Very rarely there can be change in eod span file which is released by exchange to report margins. Anyhow I personally would suggest to maintain 10% additional free cash to cover those cases.

1 Like

If you dont mind please share which money market fund you are investing ? and I guess because they have longer duration - they are more risky.

Check below

Currently I’m investing in Aditya Birla Sun Life Money Manager Fund.

As per the post shared by @pankushri - I see people are talking about investing in gilt and SGB along with money market fund. I do considered both the option but came to conclusion - present scenario may not be good for both.

Gilt fund may give even negative return in interest rate hike scenario, and it’s safe to assume we are somewhere near to the bottom of the interest rate cycle, chances of going down is very very slim.

SGB - Gold generally has inverse relationship with equity market i.e. Gold generally appreciate when there is global calamity (1970s Iran oil crisis, 2008 financial crisis, 2020 Corona pandemic), now since we have vaccines and more or less economy is coming back on track so gold may not perform good - can even deliver negative return which is actually the current course for last 6-8 months.

1 Like

consider SGB is a hedged asset class in your portfolio ,. always have a 10 % allocation to gold in your portfolio , its will protect your portfolio from bleeding . forget about corona , tommrow what will happen no one knows in the world , so always before any kind fo bad situation will come in future before have a gold exposure in your portfolio

I think you should fix the problem with margin file (why it is coming after 12 night) - instead of asking traders to keep 10% free cash …(on which you don’t pay any interest) on which you earn some interest.
I am not sure if its intentional that Zerodha send margin file after 12 night.
Most other brokers send early like before 9 pm.
When will you fix the margin file problem? Also margin file has errors sometimes mainly when we sell shares - it does not reflect early payin credit on margin file until next day.

Maintain in liquid collateral, no need to pay us any interest. Point here is one should always has a bit extra cash/margin to cover sudden changes in margin or if position moved against them, this is right way of trading, said that it is up to user and broker has no right to say that, just this is my personal suggestion.

I guess you mean margin statement, it is coming a bit late because there is delay from exchanges in sending files todo EOD processes at our end and also it may take some more time to process all files considering our client base, we are working on fasten this process.
Also margin statement won’t cover all cases of shortfall, there are cases which are missed so it not foolproof.

I guess this happened with you once, are you facing this regularly?

1 Like

It happened twice - Since than I stopped trading FNO with Zerodha - why go through all this stress …late margin file - wrong margin file and more…not worth it

If you are buying only for trading F&O then, I will give you suggestion not to invest in any of these. I have done for a year and now i am un- pledging all these securities…

Why?

Consider 10 Lakh investment, we only get 9 Lakh after haircut. plus risk also. And returns not guaranteed.

But cash has no return …so what is the option for to meet that darn 50% cash requirement?

Cash itself is return. Consider 1 lakh haircut that you will not use in case of pledging.

Same 1 lakh you can sell one extra lot of BN or Nifty and make good returns

2 Likes