Zerodha Part 2
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thanks Zerodha. Now I am clear as to how the MTM works. 
Just want to clarify what happens if a client has done some trading and the market moves in his favour or against him. I would like to give one scenario for both situations. Each scenario has two quesions. One for trading day and one for holding position overnight. So a total of 4 questions.
CASE 1) Favourable Movement.
Assumption: Client has booked all his trading money as margin to trade in futures (be it MIS or NRML).
In the example nifty went up by 1.67% (from 6000 to 6100), the margin required also went up by 1.67% (from 30000 to 30500).
Suppose someone has taken a position say in HUL. If the stock price moves up by 20% in one day, then the MIS and the NRML margins required would move up by 20%.
So if a client had X rupees blocked as margin previously. The new margins required would be Y = 1.2X, and X = 0.83Y. Which means that the initial margins submitted by the client (X which is his whole trading money) is now 83.33% of the margin required under the MIS or NRML product. Suppose this movement happens by 12.00 PM
I have put the below table which shows how the initial margins would decline if the stock price moves up from 5% to 30%.
05% increase - 95.24%
10% increase - 90.91%
15% increase - 86.96%
20% increase - 83.33%
25% increase - 80.00%
30% increase - 76.92%
50% increase - 66.67%
So what I want to know is that till when would the client be allowed to hold his positions during the rest of the day under MIS/NRML. and till what limit would the client be allowed to hold position overnight under NRML. I would give you my understanding on this issue which is as below and you can just tell me if I am wrong or correct:
For positions during trading day (COVER/MIS/NRML):
I would assume that a client having favourable position and thus having MTM profits would be allowed to hold his positions for the rest of day until 3.20 or 3.00 (please tell whether its 3.00 or 3.20?) for both NRML and MIS IRRESPECTIVE of whether the Market moves up (or down and the exchange increases the margin required due to volatility) by 05% or 50% and his margin required in the trading account drops from 100% to 95% to 66.67%.
1) So am I correct that a favourable trade (whether MIS/COVER/NRML) would be allowed to continue for the trading day (till 3.00 or 3.20 ?) irrespective of how much the client's initial margin has declined due to an increase in margin from the exchange, and that there would be no auto square off or margin call till end of trading day. Please tell if I am right in my understanding?
For holding the position overnight (for NRML):
Now once the client gets the MTM credited next trading day, the client would definitely have cover for his increased margins. But for the end of today's trading day the client will be short of margins by 3.20 PM. So say the client has new margin requirement of 130,000 and the client has 100,000 in his account and 300,000 in his MTM profits. So the client has 76% of the margin required under NRML but 300,000 in MTM profits.
2) So in this case how much % margin is sufficient to hold the positions overnight? will the client be asked for full 100% (130000) to hold overnight or will he be allowed to hold with say 90% (117000) or 80% (104000) or will he be allowed to hold with 76% itself (100,000) considering that next day he would have 400,000 in his trading account.
CASE 2) Unfavourable Movement.
Assumption: Client has booked all his trading money as margin to trade in futures (be it MIS or NRML).
for trading day (MIS/NRML):
3) The client has MTM losses. The margin required for MIS/NRML in the account has decreased. So if it is 100% margin required originally under MIS/NRML. The client account margin is now reducting to 95%, 90%, 85%, 80%. Till when would the client be allowed to hold position during the trading day till 3.20 or 3.00 PM?
For overnight (NRML):
4) The client has MTM losses. The overnight margin required is 100%. The client has say 98%, 97%, or 95% or 90%, or 85% of the overnight margin. Till what decrease will the client be allowed to hold his position overnight?
Thanks.
Just want to clarify what happens if a client has done some trading and the market moves in his favour or against him. I would like to give one scenario for both situations. Each scenario has two quesions. One for trading day and one for holding position overnight. So a total of 4 questions.
CASE 1) Favourable Movement.
Assumption: Client has booked all his trading money as margin to trade in futures (be it MIS or NRML).
In the example nifty went up by 1.67% (from 6000 to 6100), the margin required also went up by 1.67% (from 30000 to 30500).
Suppose someone has taken a position say in HUL. If the stock price moves up by 20% in one day, then the MIS and the NRML margins required would move up by 20%.
So if a client had X rupees blocked as margin previously. The new margins required would be Y = 1.2X, and X = 0.83Y. Which means that the initial margins submitted by the client (X which is his whole trading money) is now 83.33% of the margin required under the MIS or NRML product. Suppose this movement happens by 12.00 PM
I have put the below table which shows how the initial margins would decline if the stock price moves up from 5% to 30%.
05% increase - 95.24%
10% increase - 90.91%
15% increase - 86.96%
20% increase - 83.33%
25% increase - 80.00%
30% increase - 76.92%
50% increase - 66.67%
So what I want to know is that till when would the client be allowed to hold his positions during the rest of the day under MIS/NRML. and till what limit would the client be allowed to hold position overnight under NRML. I would give you my understanding on this issue which is as below and you can just tell me if I am wrong or correct:
For positions during trading day (COVER/MIS/NRML):
I would assume that a client having favourable position and thus having MTM profits would be allowed to hold his positions for the rest of day until 3.20 or 3.00 (please tell whether its 3.00 or 3.20?) for both NRML and MIS IRRESPECTIVE of whether the Market moves up (or down and the exchange increases the margin required due to volatility) by 05% or 50% and his margin required in the trading account drops from 100% to 95% to 66.67%.
1) So am I correct that a favourable trade (whether MIS/COVER/NRML) would be allowed to continue for the trading day (till 3.00 or 3.20 ?) irrespective of how much the client's initial margin has declined due to an increase in margin from the exchange, and that there would be no auto square off or margin call till end of trading day. Please tell if I am right in my understanding?
For holding the position overnight (for NRML):
Now once the client gets the MTM credited next trading day, the client would definitely have cover for his increased margins. But for the end of today's trading day the client will be short of margins by 3.20 PM. So say the client has new margin requirement of 130,000 and the client has 100,000 in his account and 300,000 in his MTM profits. So the client has 76% of the margin required under NRML but 300,000 in MTM profits.
2) So in this case how much % margin is sufficient to hold the positions overnight? will the client be asked for full 100% (130000) to hold overnight or will he be allowed to hold with say 90% (117000) or 80% (104000) or will he be allowed to hold with 76% itself (100,000) considering that next day he would have 400,000 in his trading account.
CASE 2) Unfavourable Movement.
Assumption: Client has booked all his trading money as margin to trade in futures (be it MIS or NRML).
for trading day (MIS/NRML):
3) The client has MTM losses. The margin required for MIS/NRML in the account has decreased. So if it is 100% margin required originally under MIS/NRML. The client account margin is now reducting to 95%, 90%, 85%, 80%. Till when would the client be allowed to hold position during the trading day till 3.20 or 3.00 PM?
For overnight (NRML):
4) The client has MTM losses. The overnight margin required is 100%. The client has say 98%, 97%, or 95% or 90%, or 85% of the overnight margin. Till what decrease will the client be allowed to hold his position overnight?
Thanks.
Last edited:
thanks Zerodha. Now I am clear as to how the MTM works.
Just want to clarify what happens if a client has done some trading and the market moves in his favour or against him. I would like to give one scenario for both situations. Each scenario has two quesions. One for trading day and one for holding position overnight. So a total of 4 questions.
CASE 1) Favourable Movement.
Assumption: Client has booked all his trading money as margin to trade in futures (be it MIS or NRML).
In the example nifty went up by 1.67% (from 6000 to 6100), the margin required also went up by 1.67% (from 30000 to 30500).
Suppose someone has taken a position say in HUL. If the stock price moves up by 20% in one day, then the MIS and the NRML margins required would move up by 20%.
So if a client had X rupees blocked as margin previously. The new margins required would be Y = 1.2X, and X = 0.83Y. Which means that the initial margins submitted by the client (X which is his whole trading money) is now 83.33% of the margin required under the MIS or NRML product. Suppose this movement happens by 12.00 PM
I have put the below table which shows how the initial margins would decline if the stock price moves up from 5% to 30%.
05% increase - 95.24%
10% increase - 90.91%
15% increase - 86.96%
20% increase - 83.33%
25% increase - 80.00%
30% increase - 76.92%
50% increase - 66.67%
So what I want to know is that till when would the client be allowed to hold his positions during the rest of the day under MIS/NRML. and till what limit would the client be allowed to hold position overnight under NRML. I would give you my understanding on this issue which is as below and you can just tell me if I am wrong or correct:
For positions during trading day (COVER/MIS/NRML):
I would assume that a client having favourable position and thus having MTM profits would be allowed to hold his positions for the rest of day until 3.20 or 3.00 (please tell whether its 3.00 or 3.20?) for both NRML and MIS IRRESPECTIVE of whether the Market moves up (or down and the exchange increases the margin required due to volatility) by 05% or 50% and his margin required in the trading account drops from 100% to 95% to 66.67%.
1) So am I correct that a favourable trade (whether MIS/COVER/NRML) would be allowed to continue for the trading day (till 3.00 or 3.20 ?) irrespective of how much the client's initial margin has declined due to an increase in margin from the exchange, and that there would be no auto square off or margin call till end of trading day. Please tell if I am right in my understanding?
For holding the position overnight (for NRML):
Now once the client gets the MTM credited next trading day, the client would definitely have cover for his increased margins. But for the end of today's trading day the client will be short of margins by 3.20 PM. So say the client has new margin requirement of 130,000 and the client has 100,000 in his account and 300,000 in his MTM profits. So the client has 76% of the margin required under NRML but 300,000 in MTM profits.
2) So in this case how much % margin is sufficient to hold the positions overnight? will the client be asked for full 100% (130000) to hold overnight or will he be allowed to hold with say 90% (117000) or 80% (104000) or will he be allowed to hold with 76% itself (100,000) considering that next day he would have 400,000 in his trading account.
CASE 2) Unfavourable Movement.
Assumption: Client has booked all his trading money as margin to trade in futures (be it MIS or NRML).
for trading day (MIS/NRML):
3) The client has MTM losses. The margin required for MIS/NRML in the account has decreased. So if it is 100% margin required originally under MIS/NRML. The client account margin is now reducting to 95%, 90%, 85%, 80%. Till when would the client be allowed to hold position during the trading day till 3.20 or 3.00 PM?
For overnight (NRML):
4) The client has MTM losses. The overnight margin required is 100%. The client has say 98%, 97%, or 95% or 90%, or 85% of the overnight margin. Till what decrease will the client be allowed to hold his position overnight?
Thanks.
Just want to clarify what happens if a client has done some trading and the market moves in his favour or against him. I would like to give one scenario for both situations. Each scenario has two quesions. One for trading day and one for holding position overnight. So a total of 4 questions.
CASE 1) Favourable Movement.
Assumption: Client has booked all his trading money as margin to trade in futures (be it MIS or NRML).
In the example nifty went up by 1.67% (from 6000 to 6100), the margin required also went up by 1.67% (from 30000 to 30500).
Suppose someone has taken a position say in HUL. If the stock price moves up by 20% in one day, then the MIS and the NRML margins required would move up by 20%.
So if a client had X rupees blocked as margin previously. The new margins required would be Y = 1.2X, and X = 0.83Y. Which means that the initial margins submitted by the client (X which is his whole trading money) is now 83.33% of the margin required under the MIS or NRML product. Suppose this movement happens by 12.00 PM
I have put the below table which shows how the initial margins would decline if the stock price moves up from 5% to 30%.
05% increase - 95.24%
10% increase - 90.91%
15% increase - 86.96%
20% increase - 83.33%
25% increase - 80.00%
30% increase - 76.92%
50% increase - 66.67%
So what I want to know is that till when would the client be allowed to hold his positions during the rest of the day under MIS/NRML. and till what limit would the client be allowed to hold position overnight under NRML. I would give you my understanding on this issue which is as below and you can just tell me if I am wrong or correct:
For positions during trading day (COVER/MIS/NRML):
I would assume that a client having favourable position and thus having MTM profits would be allowed to hold his positions for the rest of day until 3.20 or 3.00 (please tell whether its 3.00 or 3.20?) for both NRML and MIS IRRESPECTIVE of whether the Market moves up (or down and the exchange increases the margin required due to volatility) by 05% or 50% and his margin required in the trading account drops from 100% to 95% to 66.67%.
1) So am I correct that a favourable trade (whether MIS/COVER/NRML) would be allowed to continue for the trading day (till 3.00 or 3.20 ?) irrespective of how much the client's initial margin has declined due to an increase in margin from the exchange, and that there would be no auto square off or margin call till end of trading day. Please tell if I am right in my understanding?
For holding the position overnight (for NRML):
Now once the client gets the MTM credited next trading day, the client would definitely have cover for his increased margins. But for the end of today's trading day the client will be short of margins by 3.20 PM. So say the client has new margin requirement of 130,000 and the client has 100,000 in his account and 300,000 in his MTM profits. So the client has 76% of the margin required under NRML but 300,000 in MTM profits.
2) So in this case how much % margin is sufficient to hold the positions overnight? will the client be asked for full 100% (130000) to hold overnight or will he be allowed to hold with say 90% (117000) or 80% (104000) or will he be allowed to hold with 76% itself (100,000) considering that next day he would have 400,000 in his trading account.
CASE 2) Unfavourable Movement.
Assumption: Client has booked all his trading money as margin to trade in futures (be it MIS or NRML).
for trading day (MIS/NRML):
3) The client has MTM losses. The margin required for MIS/NRML in the account has decreased. So if it is 100% margin required originally under MIS/NRML. The client account margin is now reducting to 95%, 90%, 85%, 80%. Till when would the client be allowed to hold position during the trading day till 3.20 or 3.00 PM?
For overnight (NRML):
4) The client has MTM losses. The overnight margin required is 100%. The client has say 98%, 97%, or 95% or 90%, or 85% of the overnight margin. Till what decrease will the client be allowed to hold his position overnight?
Thanks.
Phew!! ur questions are long..
..Very simply put,
1. If you are making profits, you don't have to be worried about margins, your positions will never be squared off..
2. If you are making losses, in intraday when you loose 60% of your capital auto square offs will happen.
For overnight(NRML) , you need minimum SPAN margin in your account + some more.. So typically around 15 to 20% lesser than NSE required margins and your margin won't be allowed to carry forward.
Phew!! ur questions are long.. ..
Very simply put,
1. If you are making profits, you don't have to be worried about margins, your positions will never be squared off..
2. If you are making losses, in intraday when you loose 60% of your capital auto square offs will happen.
For overnight(NRML) , you need minimum SPAN margin in your account + some more.. So typically around 15 to 20% lesser than NSE required margins and your margin won't be allowed to carry forward.
..Very simply put,
1. If you are making profits, you don't have to be worried about margins, your positions will never be squared off..
2. If you are making losses, in intraday when you loose 60% of your capital auto square offs will happen.
For overnight(NRML) , you need minimum SPAN margin in your account + some more.. So typically around 15 to 20% lesser than NSE required margins and your margin won't be allowed to carry forward.
But thanks for your patience reply. Now its clear. I want to know what is NSE Required Margin?
NSE REQUIRED MARGIN = SPAN MARGIN + EXPOSURE MARGIN.
OR NSE REQUIRED MARGIN = SPAN MARGIN.
thanks Zerodha. :hap2: That's great to know. So if you are making profits in MIS or Cover or NRML then you don't need to worry about intra-day margins even if some stock moves up or goes down by 30-50%.
but for overnight I would like to give a specific example of an extreme case,
If I buy 100,000 worth of futures as NRML and my MTM is 500,000. But the NSE margin (I assume that NSE margin is SPAN+EXPOSURE) has increased to 150000. So right now my 100,000 in account is 66% of 150,000. Then would I be able to hold till next day as I am making profits and next day my balance would be 600,000 and margin blocked would be 150000.
1) So can I hold the above position overnight with 100,000 or would I be required to square off before 3.20 pm and take a fresh position to Hold overnight in above case?
Zerodha, under NRML to hold overnight you say SPAN Margin + Some More is Required.
So to be clear I took an example. Tata Power July series has SPAN MARGIN 7.60%(24000 rounded) and Exposure Margin 5% (16000 rounded). So when I buy one lot of Tata Power as NRML, you block 24000 + 16000 = 40000
2) So if I am in loss how much will be sufficient to hold this lot overnight. It would be Span + X. Span is 24000. What would be typical X. 15% is 6000. So if one is down 15%, X would be 16000-6000=10000. So if you have around 34000 to 39000 you would be just safe to hold overnight. So can I say X is 10000+ in above example? or is X = 5000 could also be sufficient?
3) and lastly I know that the square off timing under MIS is 3.20 PM. But is it also possible that the square off for a profitable or loss making trade might be done early due to some volatility say by 3.00 PM because the Risk Team might feel that it wont be possible to square off after 3.20 PM?
thanks.
Last edited:
Yes a little long. But thanks for your patience reply. Now its clear.
I want to know what is NSE Required Margin?
NSE REQUIRED MARGIN = SPAN MARGIN + EXPOSURE MARGIN.
OR NSE REQUIRED MARGIN = SPAN MARGIN.
thanks Zerodha. :hap2: That's great to know. So if you are making profits in MIS or Cover or NRML then you don't need to worry about intra-day margins even if some stock moves up or goes down by 30-50%.
but for overnight I would like to give a specific example of an extreme case,
If I buy 100,000 worth of futures as NRML and my MTM is 500,000. But the NSE margin (I assume that NSE margin is SPAN+EXPOSURE) has increased to 150000. So right now my 100,000 in account is 66% of 150,000. Then would I be able to hold till next day as I am making profits and next day my balance would be 600,000 and margin blocked would be 150000.
1) So can I hold the above position overnight with 100,000 or would I be required to square off before 3.20 pm and take a fresh position to Hold overnight in above case?
Zerodha, under NRML to hold overnight you say SPAN Margin + Some More is Required.
So to be clear I took an example. Tata Power July series has SPAN MARGIN 7.60%(24000 rounded) and Exposure Margin 5% (16000 rounded). So when I buy one lot of Tata Power as NRML, you block 24000 + 16000 = 40000
2) So if I am in loss how much will be sufficient to hold this lot overnight. It would be Span + X. Span is 24000. What would be typical X. 15% is 6000. So if one is down 15%, X would be 16000-6000=10000. So if you have around 34000 to 39000 you would be just safe to hold overnight. So can I say X is 10000+ in above example? or is X = 5000 could also be sufficient?
3) and lastly I know that the square off timing under MIS is 3.20 PM. But is it also possible that the square off for a profitable or loss making trade might be done early due to some volatility say by 3.00 PM because the Risk Team might feel that it wont be possible to square off after 3.20 PM?
thanks.
But thanks for your patience reply. Now its clear. I want to know what is NSE Required Margin?
NSE REQUIRED MARGIN = SPAN MARGIN + EXPOSURE MARGIN.
OR NSE REQUIRED MARGIN = SPAN MARGIN.
thanks Zerodha. :hap2: That's great to know. So if you are making profits in MIS or Cover or NRML then you don't need to worry about intra-day margins even if some stock moves up or goes down by 30-50%.
but for overnight I would like to give a specific example of an extreme case,
If I buy 100,000 worth of futures as NRML and my MTM is 500,000. But the NSE margin (I assume that NSE margin is SPAN+EXPOSURE) has increased to 150000. So right now my 100,000 in account is 66% of 150,000. Then would I be able to hold till next day as I am making profits and next day my balance would be 600,000 and margin blocked would be 150000.
1) So can I hold the above position overnight with 100,000 or would I be required to square off before 3.20 pm and take a fresh position to Hold overnight in above case?
Zerodha, under NRML to hold overnight you say SPAN Margin + Some More is Required.
So to be clear I took an example. Tata Power July series has SPAN MARGIN 7.60%(24000 rounded) and Exposure Margin 5% (16000 rounded). So when I buy one lot of Tata Power as NRML, you block 24000 + 16000 = 40000
2) So if I am in loss how much will be sufficient to hold this lot overnight. It would be Span + X. Span is 24000. What would be typical X. 15% is 6000. So if one is down 15%, X would be 16000-6000=10000. So if you have around 34000 to 39000 you would be just safe to hold overnight. So can I say X is 10000+ in above example? or is X = 5000 could also be sufficient?
3) and lastly I know that the square off timing under MIS is 3.20 PM. But is it also possible that the square off for a profitable or loss making trade might be done early due to some volatility say by 3.00 PM because the Risk Team might feel that it wont be possible to square off after 3.20 PM?
thanks.
Minimum required after which they charge penalty is : SPAN
1. Even for overnight, if you are making profits you don't have to worry about the incremental increase in margins.
In your case, with 1lk as margin you making 5lk in futures as MTM is not a realistic example. If with 1lk you have bought 4lots of nifty in NRML, you will need 2500 points movement in Nifty to make 5lk as MTM. But yes in such an extreme case there could be an exchange penalty, but we won't square any positions off if you are making profits.
Why penalty?
You have 1lk and 4 lots. Exchange penalty starts if you have less than 18k/lot(SPAN). If market went up 2500 points, The SPAN might go up to 27k/lot. You have 1lk where as SPAN required now will 27 x 4 = 1.08lk and you are short Rs8000. So exchange would put a penalty on this short amount, I guess b/w 0.5 to 1%, so you will probably have a penalty of Rs 80, guess you wouldn't mind if MTM is 5lks.
2. If you are making a loss, then it is at the discretion of our RMS team, especially if you are utilizing the funds completely. So if 25k is what is required to hold overnight, if you are loosing more than 15 to 20%, our RMS team could square your positions off. Again as I said, at the discretion of our RMS team.
3. You make profits, no one is going to square off your position early. But yes if you are making losses because the market volatility is extremely high, we might be stricter in terms of margin requirement.
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