uTrade AlgosWhen you use the Margin Trading Facility (MTF) on Share India, you don’t need to pay the full price of a stock upfront. Instead, you need to deposit a margin, which is a percentage of the stock’s price. The margin requirement depends on the type of stock you’re trading.
How is the Margin Calculated?
As per the regulatory guidelines, the amount of margin to be deposited for availing the MTF facility is calculated as follows:
Non F&O Stocks: Stock’s VAR (Value at Risk) + 5 times the Stock’s ELM (Extreme Loss Margin)
F&O Stocks: Stock’s VAR + 3 times the Stock’s ELM
Note: Share India charges a minimum margin of 20% against all MTF positions to ensure you are adequately covered for your trades.
Example Scenario:
Let’s say you want to buy a stock priced at ₹100 (non-F&O stock). Supposedly, VAR is 5% and ELM is 4% of this stock. Here’s how the margin requirement would work:
Margin Requirement = VAR + 5 × ELM = 5% + 5 × 4% = 5% + 20% = 25%
This means the margin you need to pay upfront is 25% of the stock price, which equals ₹25 for a stock priced at ₹100.
What Does This Mean for You?
- You contribute ₹25 as your margin, and Share India funds the remaining ₹75 to complete the purchase of one share.
- With ₹100 in your account, you can buy 4 shares of this stock priced at ₹100 each (since each share only requires ₹25 as margin).
Important Things to Keep in Mind:
- The margin requirement can change if the stock’s VAR or ELM changes. Additionally, the entry or exit of stock from the F&O tradable list may result in a change to the applicable MTF margin.
- You are allowed to meet their MTF margin obligations by either paying cash or by pledging approved securities available as free holding in your Demat account.
- Always check the latest margin requirements for the stock you’re interested in before placing an MTF order, as these can be updated periodically.
By understanding these details, you can learn to effectively manage and utilise MTF margins to enhance your investment strategy.
For any questions or assistance, feel free to reach out to Share India’s support team at support@shareindia.com or call us at 1800 203 0303.