5Paisa Margin Facility
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5Paisa provides its customers with a margin trading facility (MTF). This is being provided to them as per the rules and regulations of SEBI and the stock exchanges.
These rules and regulations are amended from time to time and traders are notified regarding the same.
It is also to be noted that all stocks are not available to be traded under the Margin Trading Facility.
Only those shares which are part of the Equity segment and are classified as “Group 1 Security”, will be eligible for the same.
5Paisa also holds the right to provide Margin Trade Facility to its clients as per its discretion. The decision towards it shall be it’s own and no queries towards are usually entertained by the brokerage firm.
The 5Paisa margin requirements can be seen through this table:
|Stock Type||The margin which is Allowed|
|Only the stocks which are part of Group 1 are eligible for trading in the Futures & Options Segment||(Extreme Loss Margin multiplied by 3) + Value at Risk|
|Stocks which are in Group 1 excluding the stocks in the Future and Option Segment||(Extreme Loss Margin multiplied by 5) + Value at Risk|
5Paisa margin rules are also clear about the client maintaining the above-mentioned margin. This has to be followed throughout the period the client is availing the services of the Margin Trading Facility.
Necessary margin calls are made by 5Paisa and the client has to make good the shortfall in the margin barring which the brokerage firm can go ahead and liquidate the securities or the collaterals provided.
Let us look at the other 5Paisa margins which are provided:
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5Paisa Equity Margin
5Paisa Equity margin is one of its primary offerings. In other words, the Leverage 5Paisa provides to its clients is up to 20 times of the trading margin.
A quick word regarding leverage.
It is the action by which a large number of shares or contracts are traded with a limited amount. It is also defined as borrowed money used to amplify returns.
This is strictly limited to intra-day trading and the position is not allowed to be transferred over to the next day.
However, there is an inherent risk in dealing with leverages. Hence, 5Paisa allows the trader to avail of the stop-loss option to help him/her minimize the risks.
5Paisa F&O Margin
5Paisa F&O Margin is the margin that the broker will collect upfront to cover for all the losses. It is also called the Initial margin since this has to pay at the beginning of trading.
This is irrespective of whether you are selling or buying.
The initial margin is the combination of the SPAN margin and the Extreme Loss Margin or the Exposure Margin. The SPAN margin is calculated based on the risk faced by the Future contracts and is calculated by the SPAN software.
The Extreme Loss Margin (ELM) or Exposure margin is the margin availed over and above the SPAN margin.
This is calculated based on the exposure each Future contract faces.
The initial margin is levied to protect the Future contracts from volatility and sudden price upswings.
5Paisa Equity Future Margin
The 5Paisa margin related to Equity Future is 3.5 times. This is again for intraday.
5Paisa Commodity Margin
It is extremely important to understand how the Commodity margining system works.
The initial margin levied is the combination of the SPAN (Standard Portfolio Analysis of Risk) and the Extreme Loss Margin or the exposure margin.
In addition to this 5paisa also levies any other margin that is deemed fit to cover further losses.
5Paisa levies the Delivery period and the Tender period margins. This is usually done as the contracts are nearing the expiry date. This is to ensure that commodity delivery does not default.
It needs to remember though that this is not done to square off contracts. It is only applicable to the actual delivery of the commodity.
For Crude Oil Futures the initial margin is a minimum of 4% or the SPAN margin, whichever tends to be higher. The Extreme Loss Margin is a minimum of 1.00%.
The market to market margin is calculated daily and is done when the price movement is unfavorable.
Special margins are applicable only when required depending on the market volatility.
These apply to both short and long futures.
5Paisa Currency Margin
The 5Paisa Currency margin is divided into two parts.
The initial margin, as mandated by the SEBI.
This contains the combination of the SPAN and the Exposure margin.
The Initial margin calculation is based on 99% Value at Risk or VaR.
The 5Paisa Margin for Exposure calculation is provided by a table below:
|For Futures, it is 1% of the GOP(GROSS OPEN POSITION)|
|0.3%of GOP||0.5% of GOP||0.7% of GOP||For Options it 1.5% of the GOP. This is only for the Short Options.|
It is also important to know the SPAN Margin with respect to Currency Futures:
- USDINR 3.5 SIGMA (which is 3.5 standard deviations)
- EURINR 3.5 SIGMA (which is 3.5 standard deviations)
- GBPINR 3.5 SIGMA (which is 3.5 standard deviations)
- JPYINR 3.5 SIGMA (which is 3.5 standard deviations)
The trading 5Paisa margin for Currency Future is 1x
And for Currency Option is 1x.
Both are for Intraday trade.
5Paisa margin provides ample scope to traders to amplify their returns. However, it is also pertinent to know that the leverage which is provided by the brokerage attracts an annual interest rate of 18%, charged monthly.
It does not have a specific settlement date. But it would be ideal for the trader to have it settled before the interest starts accruing.
5Paisa trades under all the segments as we have seen from the above article. However, it is also imperative for the trader to understand the underlying risks associated with leverages and a lack of a stop loss.
These if taken care of, will lead to a fulfilling experience of trading.
5Paisa Margin FAQs
Q1: Does 5Paisa does commodity trading?
Yes, 5pasia does commodity trading. It offers the facility at MCX.
Q2: Does 5Paisa offer a Margin Trading Facility?
5Paisa does offer a Margin Trading facility to its clients. However, it reserves the right to provide as well as terminate.
Q3: Is it mandatory to pay the initial margin while trading for 5Paisa F&O?
It is mandatory to pay the initial margin since it is a regulatory mandate set by SEBI. It is done so to cover the losses arising out of market volatility and wild price changes.
The initial margin is a combination of the SPAN margin and the Exposure Margin. The SPAN margin is based on the Value at Risk model, which ideally checks the risk each stock faces.
The exposure margin calculates the exposure faced by each stock. It is also known as the Extreme Loss Margin.
Q4: What are the margins provided by 5Paisa with respect to the segments?
- Equity Delivery has a trading margin of 4x
- Equity Intraday has up to 20x
- Equity Future has an intraday of 3.5x and if you are carrying it forward then 1x with no margin
- Equity Option has an intraday of 1x and again if you carrying it forward the 1x
- Currency Future has an intraday of 1x
- Currency Option has an intraday of 1x
Q5: Does 5Paisa charge interest on the margin funding?
Yes. 5Paisa charges an 18% interest on margin funding which annually but calculates every month. This is done because margin funding is primarily a loan that 5Paisa provides to its clients to use it as leverage. With this leverage, the trader can trade larger positions. Trading on larger positions amplifies their returns.
Stockquantum was founded by Dharmendra Mukati in 2018. I am a Trader and Investor in the last 10 years.
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