max trade and investment in sharekhan

ashu1234

Well-Known Member
#2
Hi,
Can anyone please tell me initial margin for silverM in max trade and investment...
I came to know that there is 10X exposure in max trade. What does it mean...?

thanks
Hi,
Lets understand clearly what margin exactly is and how it is calculated.
Margin which is required to trade a contract is combination of 2 variables.
Span margin + Exposure margin.
Span margin is a must to trade a contract and it is generally required by the exchange in addition to that Exposure margin is also added to cushion the movement of day to day movement.
In our example Silverm the required margin is 30000 approx per lot.
If you break up the same its span is 7.5% and exposure is 5% of the contract value. (18K + 12k approx at friday's closing.)
www.sharekhan.com/Upload/Commodity_Upload/McxSpan.xls

So for positional trade one is able to hold a silverm lot with 30K(overnight holding can be buy or sell)
Now if you are talking about max 10x exposure then it applies only to Intraday trades where you might get to trade at 10 times exposure which means 30K amount will be reduced to 3000 per lot for intraday. So for intraday trading you can have 10 times as many lot as you can have versus positional trade which is only 1 lot overnight - that's the simplest way to understand it.
I doubt it if you are getting 10x exposures in commodities as they are very long discontinued by the brokers, the best one could get is 2-3 times max.
 

ashu1234

Well-Known Member
#4
Thanks Ashu. There are brokers who provide higher exposures.
But, from my personal experience, exposure kills if one lacks discipline.
Yes fully agreed both of your points. One need to be cautious, very cautious when dealing with leverage as history tells many big companies have gone down just because of fiddling with leverage.
For e.g what it takes to knock out 3000 Rs margin money to go negative - just a 600 point jerk in the market, and in the moment of these jerk even the best risk management sometimes fail and you can guess the liabilities when this jerk is huge with large positions and the counterparty defaults or delays payment. So if one broker is providing such an arrangement in exceptional cases then its ok, but if that's a regular practice than it is putting clients money at risk and also its survival too - as once client is gone due to high leverage business with client will be gone too.
And yes exposure kills a lot when we are trading for our own account. I've used exposures from 5-20 times in our domestic market to 2k times in forex and believe me the less leverage you use the best it is barring some special cases when you have good conviction and good money management to back it.
 

TraderPRO

Well-Known Member
#5
Yes fully agreed both of your points. One need to be cautious, very cautious when dealing with leverage as history tells many big companies have gone down just because of fiddling with leverage.
For e.g what it takes to knock out 3000 Rs margin money to go negative - just a 600 point jerk in the market, and in the moment of these jerk even the best risk management sometimes fail and you can guess the liabilities when this jerk is huge with large positions and the counterparty defaults or delays payment. So if one broker is providing such an arrangement in exceptional cases then its ok, but if that's a regular practice than it is putting clients money at risk and also its survival too - as once client is gone due to high leverage business with client will be gone too.
And yes exposure kills a lot when we are trading for our own account. I've used exposures from 5-20 times in our domestic market to 2k times in forex and believe me the less leverage you use the best it is barring some special cases when you have good conviction and good money management to back it.
Excellent Ashu. couldnt have said better. :)
 
#6
Hi,
Lets understand clearly what margin exactly is and how it is calculated.
Margin which is required to trade a contract is combination of 2 variables.
Span margin + Exposure margin.
Span margin is a must to trade a contract and it is generally required by the exchange in addition to that Exposure margin is also added to cushion the movement of day to day movement.
In our example Silverm the required margin is 30000 approx per lot.
If you break up the same its span is 7.5% and exposure is 5% of the contract value. (18K + 12k approx at friday's closing.)
www.sharekhan.com/Upload/Commodity_Upload/McxSpan.xls

So for positional trade one is able to hold a silverm lot with 30K(overnight holding can be buy or sell)
Now if you are talking about max 10x exposure then it applies only to Intraday trades where you might get to trade at 10 times exposure which means 30K amount will be reduced to 3000 per lot for intraday. So for intraday trading you can have 10 times as many lot as you can have versus positional trade which is only 1 lot overnight - that's the simplest way to understand it.
I doubt it if you are getting 10x exposures in commodities as they are very long discontinued by the brokers, the best one could get is 2-3 times max.
Thanks a lot for brief explanation :thumb:
I am getting 2X exposures in sharekhan
 

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