Newbie question : cash or margin, how to choose between them

#1
Hi Experts,

I have been reading these forums for a while, and i have found the resources and information contained here very useful.

I have a few questions related to margin and would like to have answered, as I could not find answers to these questions by searching the forums.

Here is my situation : I have stock margin of approximately 3.5 lacs and 10,000 Rs cash in my account. I have bought Options worth 4000 Rs. My margin report says that cash margin utilized is zero while stock margin utilized is 1650 Rs. My questions are as follows:

1) Is is absolutely necessary to have margin account to trade in F&O

2) How do I specify which trade should use cash/stock margin. I have seen this facility in ICICI, cant find the equivalent option with Indiabulls(my Broker)
I do not want to utilize my stock margin as it accrues interest( please correct me if I am wrong here)

3) How do I specify if I want to buy shares using margin. If I buy shares on margin, is there a time period I can hold on to them ( i.e. How long do I have before I need to settle/square off position).

4) If I short shares will they be sold on margin? Do they need to be squared off on the same day.

5) In the example above, if I want to stop using my stock margin and use my cash margin(which does not accrue interest), how do I do it?

I am a newbie, hope my questions don't sound silly to you guys(and excuse me if my questions don't make sense or use wrong terminology).

Thanks
Future
 

alroyraj

Well-Known Member
#2
Hi Experts,

I have been reading these forums for a while, and i have found the resources and information contained here very useful.

I have a few questions related to margin and would like to have answered, as I could not find answers to these questions by searching the forums.

Here is my situation : I have stock margin of approximately 3.5 lacs and 10,000 Rs cash in my account. I have bought Options worth 4000 Rs. My margin report says that cash margin utilized is zero while stock margin utilized is 1650 Rs. My questions are as follows:

1) Is is absolutely necessary to have margin account to trade in F&O
No. In IB they give exposure based on both stock as well as cash margin.
2) How do I specify which trade should use cash/stock margin. I have seen this facility in ICICI, cant find the equivalent option with Indiabulls(my Broker)
I do not want to utilize my stock margin as it accrues interest( please correct me if I am wrong here)
The trade automatically uses stock margin for which there is no interest charge.
3) How do I specify if I want to buy shares using margin. If I buy shares on margin, is there a time period I can hold on to them ( i.e. How long do I have before I need to settle/square off position).
Time period is 6 days. on 6th day you have to square off or if in regular touch with your RM also on 7th day.
4) If I short shares will they be sold on margin? Do they need to be squared off on the same day.
There is an intraday option by which you can short shares to the extent on 12 times total margin inclusing stock margin and cash. These need to be squared off before 3 or else system auto squares it off. In cash also it can be sold in which case it is treated as intraday. Sharea sold on margin can be kept till 6th day (interest is charged).
5) In the example above, if I want to stop using my stock margin and use my cash margin(which does not accrue interest), how do I do it?
Buy equity on cash. FnO is anyway taken on stock margin.
 

adityasaraf007

Well-Known Member
#3
There is an intraday option by which you can short shares to the extent on 12 times total margin inclusing stock margin and cash. These need to be squared off before 3 or else system auto squares it off. In cash also it can be sold in which case it is treated as intraday. Sharea sold on margin can be kept till 6th day (interest is charged).
Hi alroyraj,

If we short shares and do not cover on the same day, will it not go for auction.
 

alroyraj

Well-Known Member
#4
Hi alroyraj,

If we short shares and do not cover on the same day, will it not go for auction.
In Indiabulls ,there are 2 types of trades:cash (for delivery) and intraday (which is squared at 3pm). Since there is auto square off,there is no risk of auction compared to Sharekhan,IIFL.
 

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