I am new to zerodha and starting to trade in F&O segment in commodity and stock. If say there is a gap up or down opening in the morning and my account margin is not enough to meet the expected margin then what is zerodha’s policy on the position. Will zerodha give a chance to fullfill obligation or empty the position instantly.
@nithin Please help me with this query as it will help me decide the position size.
It depends on how much gap down/up it happened. For ex: if position require 1 lakh and it opened upto 60k -70k in loss then it will be squared off in last 1 hour, if loss is beyond that it can be squared off any time. Can check here for more on policies.
@siva Thanks for your answer. But the problem is that the answer is very vague. I don’t mind if you go technical but can you please be specific on which cases you squared Off within last 1 hour and which will be not. Also link does not contain any such information. Can you also be specific regarding when exactly will it be squared off and is there some policy regarding it preferably from NSE ? ( It is very easy for a savvy brokerage to frontrun the margin call orders if the order is big enough. )So wanted to understand.
@siva thanks for the answer. So in case of gap up or gap down opening in stock example pageind few days back( gap down of more than 10%.) Say I have a long future normal position My loss exceeds 50% of margin requirement will the square off happen without a margin call ? Also is there a zerodha policy when in last one hour as your prop team can very well front run my margin calls and make a decent money out of it. ( So asking if there is a standard policy on how you approach it?)
The policy is simple, if you don’t have enough money to carry for next day it can be squared off in last half hour. If one is loosing more than 60 to 70 % of their capital during the day, it will be squared off at any point of the time.This can also result in losing more money than one has if the volatility is super high.
Front running and all is a myth in indian retail markets, no decent sized broker take huge risk of doing that, especially in last half hour. There will be thousands of positions to square off and evaluating each is implausible.
Thanks @siva. But still the margin policy is something that Zerodha should be very clear with. As you may already know, there are a number of newbies on the market trading derivatives and I am pretty sure no one had gone through market crisis. For instance, a fall like 2008/2009 would wipe out a lot of capital, and knowing exactly how the margin call/square off works is the need of the hour. Even for somewhat experienced players, this is not so clear.
Assume, a trader holding overnight derivative positions, with pledged shares/liquidbees and little cash, and a market crash like 2008 happens overnight. can you explain the sequence of events in this situation?
in what sequence would the square of happen of positions held?
how (sequence) will the pledged holdings be liquidated?
does sequence of pledge creation matter?
would you liquidate liquidbees before selling other shares?
this is a must have requirement for traders. so please provide some example so that everyone can understand this policy. thanks.
@siva Forgive me for being harsh but can I take your inability at present to do something as a gurantee that you won’t do something for future? Also I am from programming background and believe me it is not that difficult to do what I described. I am fairly confident that it can be executed very easily.
Exchange charges span, basically in simple terms Span covers max loss than can incur in next one day in 99% cases, so basically span will fail 1 in 100 days. So, we have exposure as additional layer to safeguard if span is unable to meet max losses. The case you mentioned can be called as black swan events, no one can predict them happening before they do. So, practically if the move is beyond span and exposure then there is no way square off can happen within capital limit, one can even end up in loss beyond their capital.
This is a global problem. Every institution,individual has to take these kind of risks if they are trading with margins.
We use oms/rms system which is provided by TR(Thomson Reuters) and they are empaneled vendor with exchange which means their systems are tested rigorously and continuously audited. They provide the same version to all their member clients, so, adding or customising something has to be done on their system which in turn will be tested and approved by exchange.
Also if you are worried with front running in squaring off then it is same with every broker, any one can do according to you.
Front running is not easy thing to do, I recommend you to go deep into this, understand the prerequisites to do this, can’t be completed just like that, I mean in any case. One need to enter slowly with out effecting market price, most importantly considerable follow up quantity should be present, retail clients don’t have that much quantity which can move market prices.Generally If any big clients are there, they only take care of their positions without leaving the onus on RMS to act.
Other point, considering the volatility and gap opening, no one can give you exact point of square off and stick to it.
Personally I can only suggest you to take this out of your mind, but it is up to you.
Hi, i have a Question.
Suppose i have 1 lakh rupees and im trading in 100rs shares, so if i trade 10k qty utilizing marging is 10lakhs amount. so if in loss of 5-6lakhs u will squareoff? or out of 1lakh (50-60%) loss u squareoff?