Why has Zerodha increased intraday trading margins for BO/CO/MIS citing added volatility?


#24

Hey, I have answered this already right at the start

BO/CO is different than MIS and extremely tough to support in a market like this. Reasons being

The margin required for BO/CO is based on how many points away your stoploss is. This is not really dependent on SPAN margins like MIS. SPAN dynamically goes up with volatility, but stoploss that you select can remain the same for BO/CO.

With BO/CO, when stocks/index options are hitting circuits, the entry order will get executed. But the Stoploss/target will get rejected because of circuits. What this means is there will be a hanging BO position without a corresponding SL/Target. The only way this can be then exited is by our RMS team.

With this much volatility, there is also a high probability of both stoploss and target getting executed at the same time on bracket orders. Which again would mean a hanging position in case of bracket orders.


#25

@nithin thank you very much for your quick reply…actually i wasn’t expecting it from youself!!!
but my concerned is when a trader trades with MIS utilizing all his funds and market starts moving in opposite direction such trades will end up in huge losses even if those are closed the same day and zerodha will face problems as the traders funds are already highly leveraged and he is making huge losses so in such case how will zerodha make the trader pump in extra funds as the trader is already in more loss than his account value?
on the other hand knowing the fact of high volatility zerodha allows more leverage on MIS rather than reducing the leverage during high volatile days!!!
basically i want to know that if MIS has any special RMS which will cut the high leverage positions if it goes below the value of the traders available funds on a purticular day.


#26

sir ,please upload a video in youtube regarding these problems ,lots of traders asking same question in quara page too


#27

Already Answered.


#28

@Lets_Invest but there is no explation on why there is more leverage available for MIS specially on volatile day? isn’t it more dangerous for zerodha and their clients??


#29

We of course reduce leverage on MIS as well. Margins for trading futures was increased from 40% to 75% of SPAN+exposure. Even for equity trades the leverages were reduced.


#30

There was no excess leverage given on MIS on volatile day, infact we allowed product type MIS with little lower to full margins. We have given some leverage because we are confident on managing it.


#31

@siva @nithin thanks for your clearification.


#32

I don’t see leverage like before! You people are talking about past or present?


#33

@zerodha CAN YOU guys mention available leverage for each scrip in kite as it would be way more efficient n fast rather than accessing website when sm1 needs to make a split second decision.


#34

Uhm, i think you can easily get the necessary leverage information from here in a split second

https://zerodha.com/margin-calculator/Equity/
https://zerodha.com/margin-calculator/BracketCover/

Just keep these linkx in the Browser bookmark tab , that way you can get them in an instant.

And as far as i’ve seen this is updated on a day to day basis.

For example, Yesterday leverage for stocks like SBIN was 3.5X in MIS whereas normally it would be 14X which it is now.

Leverage for BO is less than before for a stock like SBIN, Previously BO used to provide 28X leverage whereas now it shows 16.7X which i believe is due to the volatility in the current market sessions.


#35

I am following this whenever nifty gaps up or down significantly Zerodha blocks BO and CO order types. I know that Zerodha blocks those orders due to expected volatility. Can anyone tell me which is the exact policy of zerodha for blocking BO and CO order types? How high volatility is high enough volatility to block those orders? I hope the RMS team of Zerodha follows some systematic guidelines, rather than a discretionary one. Without Knowing how high volatility is high enough volatility is high enough volatility to be unable to place orders, we, pure systematic traders, can not plan accordingly…


#36

Zerodha is always blocking BO & CO during high volatility. Instead of completely blocking, Zerodha can make it compulsory to put a very close stop loss.


#37

Explained why this isn’t an option here


#38

But Zerodha does square off the position automatically if the margin amount goes down by 75%? So if the stock fell by 200 points, a person won’t face full loss, they’ll only lose 75% of the margin paid and if they do keep free cash, that will get debited.

So I don’t see how Zerodha is at risk because the condition you mentioned, i.e, the rest Rs 1.2 lks, that never arises!


#39

We can square off only if the price is available when there is a loss. But when stocks suddenly jump or fall, by the time our square off order hits, the losses can potentially already be much larger.


#40

Hi I noticed that BO and CO are blocked today. Will the leverage on MIS stay the same?


#41

I got an email for margin call. I was in profit during the time. But not sure why this happened. Is there anyway I can understand better? I had few profit and few loss making positions, but all bracket orders.

Also I’m the daily margin statement most of my funds seem to be allocated to BSE, while I trade only in NSE. How can I allocate all my funds / margins to NSE only?