Margin Trading: A Tale of Borrowed Money and High Risk

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niveza
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Joined: Wed Feb 22, 2017 3:48 pm

Margin Trading: A Tale of Borrowed Money and High Risk

Post by niveza »

There are two types of margin trading, one that is used for intraday trading and the second where the trader holds the long position (Overnight). In both these scenarios, the percent of margin provided by the broker varies. Margin facility is available for equity, intraday and Futures & Options (F&O).

Margin Trading For Intraday - In intraday trading as the position is bought and sold in the same trading session, the risk of loss (to the brokers) is lesser compared to that of delivery. Hence a sizable margin is provided to the clients who wish to buy huge quantities of shares. In intraday, sometimes the margin of 15-20% is provided, where the trader just has to pay the 15-20% of the total cost of the transaction. For example, if a trader has to buy 1000 shares of XYZ Company at Rs. 300, the actual cost of this trade would be (1000*300) 300,000. However, if you get a margin of 15% you can buy the shares at just Rs. 45,000.

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