Trading Stock Options
- Thread starter chaitanyagoa
- Start date
You can hold it for any time until the expiry of may, provided that you dont blow up your account on mark to mark loss. If the share is in positive from you entry, then no worries. Otherwise, daily losses will be deducted from your demat account's, available margin. The day you dont have money to pay for the mark to mark losses, brokerage company will sell the futures to cover the negative position and will give you back the remaining money. So be cautious.
Since futures contract is a leveraged contract it has interest associated with it. You use margin on your stock account and cash account is accessed later. You pay nothing up front just the margin on your stock incase the trade goes bust. Hence you pay a monthly interest on the futures contract which gets deducted on daily basis.
Suppose you buy unitech for Rs 78 1 contract is 4500 Shares the actual cost is Rs351,000 now you pay certain interest to the broker on this. In my case it is 12% annually so it comes to 3510 Rs monthly. And also if the share goes down in value the difference is deducted from your account suppose share falls to 76 Rs 9000 plus interest will be deducted from your account.
If you leave the negative balance in the account interest is also charged on it on daily basis.
Please correct me if I am wrong. Atleast that is how I trade futures and take into account interest too.
Suppose you buy unitech for Rs 78 1 contract is 4500 Shares the actual cost is Rs351,000 now you pay certain interest to the broker on this. In my case it is 12% annually so it comes to 3510 Rs monthly. And also if the share goes down in value the difference is deducted from your account suppose share falls to 76 Rs 9000 plus interest will be deducted from your account.
If you leave the negative balance in the account interest is also charged on it on daily basis.
Please correct me if I am wrong. Atleast that is how I trade futures and take into account interest too.
Firstly i would like to thank you for you reply.
But lets say if you have enough money in your a/c with your broker to pay for the margin amount and any variable then can you broker charge you interest?
Like you mentioned unitech 1 lot for Rs 351000 and lets say my broker blocks 25% of this amount Rs 87750 from the money that i already have kept with him, then can he charge me interest?
But lets say if you have enough money in your a/c with your broker to pay for the margin amount and any variable then can you broker charge you interest?
Like you mentioned unitech 1 lot for Rs 351000 and lets say my broker blocks 25% of this amount Rs 87750 from the money that i already have kept with him, then can he charge me interest?
Yes I believe so because broking house doesnt use the cash margin first they always tend to use the stock margin and later they use the cash margin if you fall short or have no stocks. And as far as I know I think they charge interest on that because you are leveraged and not paying the entire money which you otherwise would have paid if you bought the same number of stocks in the cash market.
Just always remember that in the worst case scenario you must have atleast 50% of the value available with you of the total investment you are making. If you have 100,000 but take position of 350,000 and suddenly stock tanks 30% which is very likely you must be able to put in the entire cash atleast 200,000 so you are protected against Mark to Market and also automatic exit trade executed by your broker. Ideally have a stop loss in mind as in Futures you dont own anything you are mere speculator on the direction of the market. No less than gambling. But I still do it as it gives better return and extra risk and with high risk comes high return but from experience I am telling you that the losses can be huge. This January I was making a profit of 700,000 with my positions held on to them lost the entire profit and went in 700,000 Rs of loss although now I am back in profit and covered all my losses but it would have been wise to switch position through stop losses. Also I had to buy more contracts when market was 4700 to bring myself in profit because when market falls it may fall 50% but to gain that 50% it has to go up 100%.
SO always manage your risk and have cash ready to put in if needed. Ideally before a trade decide a target price and stop loss and you should be fine.
Also with futures you cant sell half or 1/3rd of your position the entire position is one share. You sell everything together and you buy everything together.
SO always manage your risk and have cash ready to put in if needed. Ideally before a trade decide a target price and stop loss and you should be fine.
Also with futures you cant sell half or 1/3rd of your position the entire position is one share. You sell everything together and you buy everything together.
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