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.
@nithin thank you very much for your quick replyâŚactually i wasnât 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.
@Lets_Invest but there is no explation on why there is more leverage available for MIS specially on volatile day? isnât it more dangerous for zerodha and their clients??
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.
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.
@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.
Just keep these linkx in the Browser bookmark tab , that way you can get them in an instant.
And as far as iâve 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.
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 accordinglyâŚ
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.
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 wonât face full loss, theyâll only lose 75% of the margin paid and if they do keep free cash, that will get debited.
So I donât see how Zerodha is at risk because the condition you mentioned, i.e, the rest Rs 1.2 lks, that never arises!
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.
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 Iâm 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?
Hi Nithin, volatility as shown by India Vix has subsided down a lot. In fact for more than 60% of the period in the last ten years, India Vix index has been higher than the current index value. So, what is the reason that still there has been no reduction in margins? Are there some other measures that you use for calculating volatility and if yes what are those and when can we expect margin reduction? Or these are the new margin requirements that you will continue to persist with in future?
Thanks & Regards.
Indian Vix represent only for nifty 50 stocks but if one considers overall volatility of all fno stocks,midcaps etc it is much higher compared to couple of years ago, and going to elections I personally donât see any reason to alter my opinion on magnitude of volatility in coming months, also regulators have implemented many new measures in last 4 months which increased margins substantially, and there is a rumor that they will set more tighter regulations on providing intraday leverage across all segments in coming days. So, going by this, I personally donât see any reduction in margins in near future and in fact one has to brace themselves for much more tighter margins going close to election date.