Beginners Future.....

I am new to Future!!!....Help needed....Would like to know on excerising an Future should I need a whole cash in my account.

say for example: spot price IVRCL 340

I am buying IVRCL futures 343. ie. 15% x 1 lot = 51450 margin. spot price for IVRCL went to 385. I would like to excercise the future, I am not interested to take delivery of the shares. Should I need 3,43,000 in my account to excerise this future or 35000 credited in my account...(as like daytrading....).

The amount (35000) will be creidted to your account....

Hellow Nandu,
I too have a question on margins for futures(nifty in particular). Once you deposit certain amount as margin for on line trading in say Nifty Futures, How is that margin amount utilized tradewise?
For example I am using ICICI direct as my on line broker, and have three linked integrated accounts for trading,Demat and saving with them. After depositing the margin money with them I tried trading in Nifty Futures for about 20 trades by squaring off the positions on that day itself without carrying over. I find that in addition to adding/deducting profit/loss respectively and additional amount of Rs.10K is deducted from margin amount also.
I was under the impression that the margins are chargeable only as long as you have a position open, and once you square off the margins charged are deposited back in to the trading account. Since no trade was kept open for the next day, can you explain how the margin amount could have been deducted?
thanks a lot in advance
sharantaka

Hi Everybody,

I will try and explain the nitty gritty in as plain a language as I can.

1) Trading A/c Consists of 2 or 3 Ledgers (Depends who you're dealing with) with the Broker for Your Trading Code that you are allocated.

2) If there are 2 Ledgers for your Trading Code, then one ledger will be called Capital Market Cash Ledger & the other will be F&O (Derivative) Ledger

3) Capital Cash Market Ledger shall consist of BSE & NSE where all your Debit, Credit & Unsettled Trades will figure for buying & selling of Shares

4) Similarly F&O Ledger shall indicate how much money you have to your Credit.

5) If there are 2 Ledgers for Cash market then one shall be for BSE & other NSE.

6) Whatever trades done in the F&O Segment shall consist of a) Contract for the day (Buy/Sell) & at what rates plus all other mandatory charges such as Rate & Quantity of Buy & Sell of a particular contract in addition you will see mandatory charges as Brokerage, Service tax, STT (0.017% only charged on Sell) plus Transaction & Other Charges inclusive of Stamp Duty which must not exceed Rs.410.00 per Crore on Turnover.... this is one charge where a lot of creative accounting is displayed by the brokerages, resulting in overcharges. Also a point of note if your turnover is high this charge can also be forfeited for High Turnover Clients. Requires some arm twisting on your part b) Client Summary Report for the day (This report differs in terms of what is shown) depends on your Broker. Normally this report is divided into many parts.
PART 1: Should indicate your Mark To Market Profit or Loss, Brokerage Commission and all the other charges.
PART 2: Should indicate your opening ledger balance.
PART 3: Should indicate your ledger balance less any Span & Exposure Margin for any open position. Span & Exposure Margins are deducted from your ledger balance to show your new c/f balance
PART 4: Should Indicate Cash Collateral and available cash for taking any positon against your pledged shares to Play the derivative. (also called margin Funding) My personal Opinion Never avail of such Funding.
PART 5: Should indicate any open positions and their description & quantity....Basically your Open Postions if any.

That's That....

To answer a particular question of yours Rs.10K, that remains in the F&O Ledger until you request for the Payout of the Amount, only then they will transfer the amount to your Savings a/c or send a cheque for the amount whatever maybe the case.

Again That's That....

If there is anything else that comes to your mind, which I might have overlooked.......will be glad to answer them to the best of my ability....Seniors & Juniors are most welcome to correct me.........if I have erred in explaining anything....

Regards

SavantGarde

Hello Savant Garde,
Thanks a lot for your detailed reply. Now let me cut the whole story short by giving you step by step actions followed by me. If you are familiar with icicicdirect.com working, you have to allocate funds for different categories like like Equity(cash), futures and options,margin trading mutual funds etc before you can place any order for any trade.
Accordingly I transferred amount X, sufficient for trading just one contract of Nifty to start with and started trading, the trading went on without a hitch and I must have completed about twenty to twent five threads just in the curret month, and I stopped to review the funding, I found that my savings account linked to trading showed credit and debit entries as per the profi or loss incurred which is fine no sweat there.
What surprised me was the amount of Rs.10K which was deducted from the original allocation 'X' for futures and options, and this 10k details do not appear in any of their statements, Ofcourse you would say that this needs to be clarified with icicidirect.com, but i only wanted to know what are the general procedures in which your margin amount is utilised by the brokers/nsdl/sebi as the case may be. If Rs 10k depletion of margin amount over 20-25 trades of one nifty contract is normal, then I don't need to take it up with icicidirect.com. Is the brokerage,STT, service tax etc deducted from your margin money?
Please advise
With best Regards
Sharantaka

Hi Savant Garde
thanks for your detailed explanation as even i had the same doubt. I am planning to enter F&O for the first time. I'll be doing it shortly.

Thanks
Parv

Hi Sharantaka,

While I am not familiar with ICICI Direct......it is simple to follow the money Trail......Let's for example say, Your account starts with 10K and through various trading activities your Net Profit or Loss Must be reflected in the existing Balance if you have no open postion & incase of an open postion, your balance must reflect Less (-) any Marked to Margin till you have an open position & after squaring off should reflect the toatal balance you have.

If the balance is more than you started with, then you have made a profit to the extent of the increase of balance and if it shows reduced balance than you started with then you have incurred a loss.

My Personal opinion as far as ICICI Bank is concerned I wouldn't have anything to do with them, even if they were the only bank in my town & same goes for HDFC Bank as well.....reasons are too many to elaborate herein.


Regards

SavantGarde

Hello SavantGarde,
Thanks for your reply again. I quite agree with you though icicidirect.com appear to be quite straght forward, there are lots of small irritants with their trading methodology, like the one I have been writing about.
I think very soon I will have think in terms of shifting out of icicidirect.com
Thanks for your explanation anyway
With regards
Sharantaka

Hi Parv & All,

My suggestion to you & for anybody wanting to get into derivatives....is to wait for a while or few days......will let you all know from my Post of "Intraday Pivot Points" when to enter & Not advisable for a Newcomer to get in for Intraday only.....be patient and you shall be rewarded.

Seeya

SavantGarde

Hi Savant Garde,
Thanks for your advice to wait for a few days for your pivot points, instead of making a hasty entry into F&O.
I will definately wait
sharantaka