Module 4 Futures Trading

Chapter 7

Margin Calculator (Part 2)

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7.1 – The trade information

I’m going to start this chapter by posting the same old question again – Why do you think margins are charged? Before you get annoyed and come chasing me, let me post the answer .

Margins are charged from a risk management perspective. It helps in preventing any undesired counter party default. The risk management system at the broker’s office (often called the RMS system) is responsible for overseeing the overall risk management. You may be interested to know that the RMS is a computer program, and all orders placed by the clients reach the exchange only once this program approves it (which takes a fraction of a second), and there are people monitoring if everything done is right/wrong.

When you place a trade, let us say to buy a futures contract (via a buy order entry form) you are essentially conveying the following details to the risk management system (RMS) –

  1. The contract you wish to buy (like TCS futures, IDEA futures etc)
  2. The quantity you wish to buy ( number of lots)
  3. The price at which you want to buy (market or limit)

Once you place the order, the RMS system evaluates the margin requirement and allows your trade to go through (provided you have the required margin amount).

However, the information that you don’t normally provide to the RMS system is the following –

  1. The duration up to which you wish to hold your trade – is your trade intraday or you would wish to hold on to it over multiple days?
  2. The stoploss point – In case the trade goes against you, at what price point you would wish to book a loss and square off the position.

Now what would happen if you provided these additional details to the RMS system? Obviously, with the additional information flowing to the RMS system; it would develop a better clarity on your risk appetite.

For example, the detail on the duration of the trade would let the system know how much volatility you are exposed to. If your trade is intraday, you are only exposed to 1 day volatility. However if your trade is for multiple days then you are not only exposed to multiple days volatility, you are also exposed to the ‘overnight risk’.

Overnight risk is risk of carrying the position overnight. For example assume I’m holding a long BPCL (a major oil marketing company in India) futures position overnight. BPCL is highly sensitive to fluctuations in crude oil prices. While I’m holding the BPCL futures, assume overnight the crude oil market shoots up by 5%. This will obviously have a negative impact on BPCL the next day as it becomes more expensive for BPCL to buy crude oil from the international markets. Hence by virtue of holding BPCL position overnight, I will suffer a loss, therefore a M2M cut. This is called ‘overnight risk’. Anyway, the point that I’m trying to make here is straightforward – from the RMS system’s perspective the longer you wish to hold the trade, the higher is the risk you are exposed to.

Likewise think about the stoploss for the trade. By not expressing your intended stoploss you are keeping the RMS system in total darkness with respect to your risk appetite. Do note, this is not mandatory information that you need to reveal. However, if you do, the RMS system gets more clarity on your trade. For example assume I buy BPCL futures Rs.649/-, in the absence of specifying a stoploss, I’m virtually exposed to an unlimited risk. However if I specify my stoploss as let us say Rs.9/-, then when BPCL falls to Rs.640/- (649 – 9) I would book a loss and get out of the trade. Hence there is complete clarity on the amount of risk I’m willing to take, which from the RMS system’s perspective is a valuable information.

So both – the duration and the stoploss of the trade gives more clarity about your risk appetite to the RMS system. So what does this mean to you as a trader?

Well, think about it – the more clarity you provide in terms of the risk you face, the higher clarity the RMS system develops. The more clarity it has, the lesser the margins required!

Very loosely put, think about this as an equivalent to shopping for a television at a consumer electronic store. I know this may not be very apt, but I hope the following analogy gives you the right message.

If you go to a consumer electronic store and enquire about the price of a television, the seller will assume you are a regular customer and he will quote the normal selling price. However if you tell him that you are likely to purchase 50 televisions, he will instantly drop the price.

In addition if you tell him you are carrying the cash with you and are willing to finish the transaction right away, he will drop both his jaws and the prices even lower. The point is – as and when the shop keeper gets more information about the transaction, the more attractive the price gets.

M4-Ch7-cartoon

7.2 – The Product types

So far, one thing is clear, the more information (in terms of risk) you are willing to convey to the RMS system, the lesser is the margin required. Needless to say, the lesser the margins required, the more you can do with your capital. So, how does a trader convey this information to the RMS system? Well, there are specific product types that are meant for this purpose. While placing an order (to either buy or sell) you can specify the product type. There are many Product types and they vary from one another mainly in terms of their functionality and the information they convey to the RMS system. While the core functionality of these product types is standard, every broker calls them with different names. I will of course talk about the product types used at Zerodha, if you are still trading with another broker, I would request you to speak to them and identify the nomenclature used.

NRML – NRML is a standard product type. Use this when you intend to buy and hold the futures trade.

Image1_Product Type

Remember when you use NRML, the risk management system has no additional information on the length of your trade (as you can continue to hold the contract till expiry) nor does it have any information on the stoploss. You suffer losses (and therefore continue to pump in the required margins). Hence because of the lack of clarity the broker’s RMS system charges you the full margins (i.e. SPAN and Exposure).

Use NRML when you intend to buy and hold the futures position over multiple days.  However do remember you can use NRML product type for intraday as well.

Margin Intraday Square off (MIS) – Zerodha’s MIS is a pure intraday product, meaning all trades placed as MIS product type will indicate that the trade will last only for the day. You cannot select MIS as an order type and expect the position to be carried forward to the next day. You have to mandatorily cut the position by 3:20PM, failing which the RMS system will do the same.

Image2_MIS

Now because the product type is MIS, the RMS system clearly knows that it is an intraday trade, which is a notch better than NRML in terms of information flow. Remember, when the trade is intraday, the trader is exposed to only 1 day’s volatility. Hence the margin requirement is lower compared to the NRML margins.

Cover order (CO) – The concept of cover order is simple. To begin with, similar to MIS, the cover order (CO) is also an intraday product. However the CO conveys additional information in terms of stoploss. This means, at the time of placing a CO, you will have to specify the stoploss as well. Hence CO conveys both the vital information –

  1. The length of the trade which is intraday
  2. The stoploss, which is the maximum loss you will bear in case the trade moves against you

The snapshot below shows the buy CO form –

Image3_CO

The area highlighted in black is where one is required to specify the stoploss. Of course, I will not get into the logistics bit, explaining how to place a CO from the trading terminal, as we have already done that through an article in z-connect 

The point that I want you to be aware is this – by placing a CO, you are not only conveying that your trade is intraday, but also conveying the maximum loss you are willing to bear. Hence by virtue of this, the margins should drop considerably (even lower than MIS).

Bracket Order (BO) – The bracket order is quite versatile. Consider the BO as an improvisation over the cover order. Needless to say, a BO is an intraday order, which means all BO orders have to be squared off within the day on or before 3:20PM. While placing a BO, you will have to mention a few other things –

  1. The stoploss – At what place you would like to get out of the trade in case the trade moves against you
  2. The Trailing stoploss – This is an optional feature where you can trail your stoploss. We have not spoken about “The trailing stoploss” so far. We will discuss the same towards the end of this chapter. But for now just remember the BO gives you an option to trail your stoploss, in fact this is one of the most popular feature of a BO
  3. Target – If the trade moves in your favor, the BO also requires you to specify the price at which you would like to book the profits

The BO sends your order to the exchange where simultaneously you can specify the target and the stoploss. This is a huge relief to active traders as it helps them in many ways. Of course for the logistics bit on how to place a BO, you can check out this article as it beautifully explains what needs to be done.

The snapshot below shows the BO buy order form, the green box highlights the SL placements –

Image4_BO

If you think about the Bracket Order, the trader is conveying to the RMS system the same set of information as that of the CO. In addition through the BO, the trader is also conveying the target price. Now what difference does the information on the target price make to the RMS system? Well, it literally makes no difference to it from the risk management perspective. Remember the RMS is only worried about your risk, and not your reward. Hence for this reason, the margin charged for BO and CO is the same.

Let us now keep the above discussion in perspective and look into few other options available on Zerodha’s margin calculator.

7.3 – Back to the Margin Calculator

Here is a quick recap – in the previous chapter we introduced Zerodha’s margin calculator.  The objective of the margin calculator is straight forward. It helps the trader figure out how much margin is required for the contract he wishes to trade. In our quest to understand the same we also understood concepts of expiry, rollover, and spread margins. With the help of this chapter, we are now clear about the information flow to the RMS system and its impact on the applicable margins. Let us keep these in perspective and look at the other two options highlighted in red provided in the margin calculator – “Equity Futures” and “BO&CO”. Here is a snapshot, highlighting these features –

Image5_MC

Equity Futures – The equity futures section in the margin calculator is a ready reckoner, as it helps the trader understand the following –

  1. The NRML margin required for a particular contract
  2. The MIS margin required for a particular contract
  3. The number of lots that a trader can buy for the given amount of money in his trading account

The Equity Futures section contains nearly 475 contracts (as of January 2015). To understand this better, let us take up a few tasks. We will solve these tasks by using the Equity Futures section of the margin calculator. And hopefully in the process you will understand how to use the section better.

Task 1 – A trader has Rs.80,000/- in his trading account. He wants to buy ACC Cements Limited Futures expiring 26th February 2015 and hold the same for 3 trading sessions. Find out the margin requirement for this contract. He also wants to trade Infosys January futures for intraday, what is the margin required? Does he have sufficient margins to initiate both the trades?

Solution – Let us deal with the ACC futures first. Since the trader intends to hold the futures contract for 3 working days, we need to look for NRML margins. Do note, this task can be achieved by using the SPAN calculator as well. We discussed this in the previous chapter. However the Equity Futures calculator has a few more advantages over a SPAN calculator.

Visit the Equity Futures section and you can see all the contracts listed here, scroll till you find the desired contract. I have highlighted the same in green. Do notice, the calculator is also listing the contract’s expiry date, lot size, and the price at which the contract is trading.

The black vertical box highlights the NRML margin for each contract.

Image6_EQ1

From the table, it is clear that the ACC Feb 2015 requires a margin of Rs.48,686/-.

To find out the margin requirement for Infosys, I need to scroll down till I spot Infosys January contracts or simply type “Infy” in the search box provided.

As we can see, Infy’s NRML margin is Rs.67,698/-(highlighted in the black arrow) and MIS margin is Rs.27,079/-(highlighted in the red arrow) . Do note the MIS margin amount is drastically lower compared to the NRML margin,

Image7_EQInfy

Clearly since the trade is for intraday the trader can choose MIS product type and benefit from a lower margin requirement, which is Rs.27,079/-. Do note, the trader can select NRML product type even for intraday, there is no harm doing so. But when one does this, the NRML margin amount gets blocked. If one is clear in his mind about the trade being intraday, then it makes sense to opt for MIS and efficiently use the capital available.

Anyway, the trader’s total margin requirement would be –

  1. 48,686/- towards the ACC contract (NRML margin as the trader wishes to hold the position for 3 days)
  2. 27,079/- towards the Infosys contract (MIS margins as it is a pure intraday product).
  3. Total margin of Rs.75,765/- (48,686 + 27079)

Clearly since the trader has Rs.80,000/- in his account, he can initiate both the trades.

Task 2 – A trader has Rs.120,000/- in his trading account. How many lots of Wipro January Futures can he buy on an intraday basis and on a multiple day basis?

Solution – Search for Wipro in the search box provided. Next to the MIS margin column, there is an option to click on “Calculate” (highlighted in green arrow). Click on the same.

Image8_EQ

After you click on it, a form sort of window opens up, you just need to enter –

  1. The amount of cash in your trading account (by default this is set to Rs.100,000/- you can edit the same to meet your requirement)
  2. The price at which the contract is trading (in fact this is pre-populated)

Have a look at the screen shot below –

Image9_EQ

The calculator suggests that I can trade up to 3 lots of Wipro futures under the NRML product type, considering NRML margin is Rs.36,806/- per lot. Also, under the MIS product type, I can trade up to 8 lots, considering the margin requirement is just Rs.14,722/- per lot.

And with that, we know all the functionalities of the Equity Futures section of the margin calculator, as easy as thatJ. We now move over to the BO&CO calculator.

7.4 – BO&CO Margin Calculator

Both bracket order and cover order have similar margin requirements for reasons we discussed earlier. Using the BO&CO calculator is quite simple; in fact it is quite similar to the SPAN calculator. In the following snapshot, I’m trying to calculate the margin requirement for Biocon Futures expiring on February 2015. Notice, I have selected everything that I need to, except for the stoploss.

Image10_BOCO

Without selecting the stoploss, I proceed and press the ‘calculate’ button. Notice when I do so, the calculator calculates the default stoploss that one can choose and the margin required. Now once I mention the stop loss, the calculator calculates the amount as shown below

Image11_Boco

As per the BO&CO calculator, the stoploss one can choose is Rs.403. Of course you can vary the stoploss to any point, and the margins will change accordingly.  Anyway, the margin required is Rs.9,062/-, which is remarkably lower compared to NRML margin of Rs.26,135/- and MIS margin of Rs.11,545.

7.5 – The trailing stoploss

Before we conclude this chapter, let us briefly discuss the ‘trailing stoploss’. The concept of trailing stoploss finds its application in bracket orders and in general plays a crucial role while trading. Hence I guess it is important to know how to trail your stoploss. Consider this situation (in fact most of us would have been in this situation) – you buy a stock at Rs.250, with an expectation that the stock price will hit Rs.270 sooner or later. You keep a stoploss at Rs.240 (just in case the trade goes against you), and hope for the best.

Things move as expected, the stock rallies all the way from Rs.250 to Rs.265 (just a few Rupees away from your target of Rs.270), however thanks to market volatility it starts to retrace back…all the way  to hit your stoploss at Rs.240. So in essence you saw profits coming in for a brief while, but were eventually forced to book a loss. How do you deal with such a situation? More often than not we are always put in such a spot, where we are right about the overall direction but get ‘stopped out’ due to market volatility.

Well, thanks to the technique of ‘trailing your stoploss’ you can prevent yourself from being in this situation. In fact at times trailing stoploss gives you a chance of making a better profit than you originally thought about.

Trailing stoploss is a simple concept. All one needs to do is adjust the stoploss based on the movement in the stock. Let me illustrate this with an example. Here is a typical trade setup –

Trade type Long
Script Infosys
Instrument Futures
Futures Price Rs.2175/-
Target Rs.2220/-
Stoploss Rs.2150/-
Risk Rs.25 (2175 – 2150)
Reward Rs.45 (2220 – 2175)

Clearly the idea is to go long at Rs.2175 and keep a stoploss at Rs.2150. The idea is to adjust the stoploss as and when the price moves in the direction of the trade. To be precise, for every 15 points of price move in the direction of the trade the SL can be adjusted accordingly. The SL can be adjusted to any level with an idea of locking in the profits. When you adjust the SL with an intention to lock the profits, it is called “Trailing Stop Loss”. Do note, in this example I have randomly opted for a 15 point move, but in reality it can be any kind of price move. Have a look at the following table, as and when the price moves 15 points in the trades favor, I trail my SL and thereby lock in certain amount of profit.

Image12_TSL

Do note, the original price target was Rs.2220, but thanks to the trailing SL technique, I can ride the momentum and close in on a higher profit.


Key takeaways from this chapter

  1. The more information one conveys to the RMS system in terms of trade duration and stoploss the lesser is the margin requirement
  2. Use NRML product type when you want to initiate a trade and carry it overnight
  3. NRML margins are the highest (SPAN + Exposure)
  4. MIS is a pure intraday trade, hence the MIS margin is lesser than the NRML margin
  5. In a MIS trade only time information is conveyed (intraday) but not the information about the stoploss
  6. A cover order (CO) is also an intraday product, besides in a CO one has to specify the stoploss
  7. A CO conveys both the time and the SL information, hence margins are lesser than MIS
  8. The margins for a Bracket Order (BO) is similar to a CO
  9. In a BO product type one has the option to specify both the SL and target price at one go. Besides one can also trail the stop loss
  10. A trailing SL technique requires one to adjust the SL as and when the script moves in favor of the trade
  11. A trailing SL is a great way to ride the momentum in a script
  12. There are no fixed rules for trailing, one can choose the trailing SL based on the market situation

273 comments

  1. keshav says:

    Good information sir.. thanks.,
    When will u upload next chapter sir..

  2. NARSIMHA says:

    sir , we r desperately waiting for back testing,alerts options etc biogs do it fast educate speedly t-u

  3. Gopalkrishna says:

    A relook at your trailing stop loss table:
    The Traling stop loss is set at 15 points
    Initial Stop loss is 25 points (2150)
    When the trade moves 15 points in my favour the stp should move by 15 point (from 2150 to 2135 and not 2125 as given in the example )please correct me if I am wrong
    Also it will help if you can post an example of a trade where rewards are less than the risk say 1:1.5

    • Karthik Rangappa says:

      In this particular example I have tried to highlight the fact that when the trade moves in your favor you can increase the SL to a certain desired level. When you opt for a BO order then you need to be particular on the way you want to trail your SL – as in for every 10 points, you may want to trail by 2. However if not for a BO order you can trail this however you want to (this is what I’ve tried to demonstrate in the example). Also suggest you relook at the table – its a long trade hence the SL should move upwards and not lower.

  4. Vidhyalakshmi says:

    Is it possible to convert a BO/CO to NRML (provided I have the required margin amount)?

    • Venu Madhav says:

      Hi Vidhya,
      BO/CO being special orders in nature, there’s no position conversion allowed. These are purely Intraday product codes and you’d have to exit the position and take fresh position in NRML if you have the required margins and would like to carry forward.

  5. Ramesh says:

    Hi,
    I would like to buy some x amount equity shares, I put SL, TGT once I bought shares. If the target reached on the day of buying I will sell that.
    If not I will sell during next coming days. Please let us know whether MIS or something else to take that.

    Regards,
    Ramesh

  6. Saurabh says:

    Folks,

    Couple of things I wanted to ask/suggest:

    1. On the SPAN calculator, I noticed that WOCKPHARMA is mentioned among the scrips that is banned. However, WOCKPHARMA has been included back in derivatives more than a month ago. Please can this be corrected?

    2. I am not well versed with options but I tried calculating the margin for the same out of curiosity. However, irrespective of the script I enter (say INFY 26th FEB CE 2300 or NIFTY), the SPAN calculator it keeps returning N/A for SPAN, EXPOSURE & TOTAL. Please let me know what am I doing incorrectly here?

    3. If I go to BO&CO section, it says “ption buying is enabled for NIFTY and BANKNIFTY only”. I am not sure why? Could somebody kindly explain?

    4. This one is a suggestion: For navigating to the SPAN calculator or varsity page (similarly other links like Q, brokerage calculator etc.), we usually have to either search for the same on google and then navigate to the page or search for it on Z-Connect. I’d request that these links be put as menu items on the home page for ease of access.

    I’d like to convey a big thank you to the Zerodha team for this much required value addition of introducing Varsity. I hope the remaining sections are doled out soon. Eagerly waiting for the section on Options!

    • Karthik Rangappa says:

      Thanks Saurab, work on option modules will start over the next few days. Right now the focus is to wrap up futures. From what I can imagine, Varsity’s option arsenal will really be state of the art…every little aspect of options will be sliced and diced. So please stay tuned.

      My answers to your queries –

      1) Wockpharam is right now under the ban period. Will explain the concept on “Securities under ban” in the chapter on Open Interest.

      2) Option buying requires one to pay premium. More on this when we take up options

      3) You can use BO&CO product type to buy options. This means you pay lesser money than the actual premium required. This is one of the unique features where the broker provides margins for options buying

      4) Thanks for suggesting this. I guess this will be addressed soon.

      • Saurabh says:

        Thanks Karthik!

        So does it mean that Wockpharma F&O is currently not being traded? I did however check on NSE and I see that both Futures price and Option chain reflect current values? What am I missing here?

        Karthik .. just one more thing .. please do consider putting up a few actual real life trading session videos to cover the concepts of F&O which will automatically include technical analysis. There is nothing better than hands on after a good theoretical dose 🙂

        • Karthik Rangappa says:

          Wockpharama is in ban period. It means only existing position can be closed and no new positions can be opened. I will talk about this in more detail in one of the upcoming chapters on ‘Open Interest’. Will try and include videos sometime in future. I’m afraid we do not have the bandwidth to do the same for now.

  7. Shashank says:

    Can I purchase debt funds through zerodha demat a/c and pledge them to get margin for F/O trading?

    • Hanan Delvi says:

      We provide collateral margins only on a few set of listed securities which can be found here.

      If you’d like to buy something safe and pledge it I’d suggest you go in for Liquid Bees.

  8. t rama says:

    sir,
    firstly thanks a lot for your chapters which are easily understandable and simple in language. Iam eagerly waiting for options sessions when it will be started and finished. with my little knowledge, i came to know in options and option strategies the risk can be known and limited.

    • Karthik Rangappa says:

      I guess Options will start in 1-2 weeks time. We will put all efforts to deliver start of the art Option course. Thanks for your patience and please stay tuned.

  9. sridharhyd says:

    Karthik…The explanation on Margins, NRML,MIS ,CO & BO are very well narrated….You are really doing a very good job with very simple examples and explanations..appreciate the simple language especially for new entrants like me…Good Job and a thumps up to you!!!!

  10. sridharhyd says:

    Karthik..One clarification…Can I not convert my MIS/CO to NRML just before 3.20PM if I have sufficient cash margin available for the positions taken by me during the day

  11. Nikunj kejriwal says:

    Dear Kartik
    If I need to calculate the margins without the Zerodha Margin Calculator. How do I do that ?. where do i get the margin requirement rates.
    And whether this margin requirement rates specified by NSE change evryday or change periodically ?

    2. What is % of margin requirement for MIS transactions ?

    • Karthik Rangappa says:

      I’m not sure who else accurately provides margin calculators :). Yes, margin requirement are specified by exchanges (NSE, BSE).

      MIS margins are approximately 40-50% lesser than NRML margin requirement.

      • CreaTorr says:

        Hello Karthik,

        1) There is a typo which you have not yet corrected. In the last figure where you have demonstrated the trailing loss, you have taken 15 point as trailing loss point but you are increasing the SL by 25 point.

        2) Just to confirm last statement, even if I’m giving target in Abs value, will I able to ride trend with help of trailing SL in BO. For e.g, Future price of Infosys is 1000. Using Zerodha’s kite app, I’m placing BO , with 10 Abs Value for both Stop Loss and target and 2 Abs Value for trailing Stop Loss. If future price hit 1030(30 Abs value increase), then SL trailed got trailed for 15th time to reach at 1020. Now, SL hit because price decreased from 1030 to 1020. So, whether my trade will get sqared off at original price target which was Rs.1010, or is it at Rs 1020 because of trailing SL technique?

        3) Throughout the Technical Analysis Chapter, you have suggested not to get out of trade unless it hit SL or target price except trailing the loss. But trailing loss is not possible in Kite app for positional trade. So, is Zerodha planning to bring it any time soon or do we need to put SL each day for open trade in coming days also? It would be very helpful if Zerodha is…

        4) Would you please help me by sharing link of NSE website from where I can find the margin requirement rates.

  12. Manish says:

    Excellent series of articles. I have one question though. Say i go long on AXISBANK-25-JUN-15 at 546.3 for 1 lot. After this order gets filled and my margin gets blocked, i place a SL-M order to sell the above futures lot if the price hits 540.05. Will it have any beneficial impact on the margin ? As the RMS gets more clarity about my risk tolerance so i was wondering if it would spare some from my margin. Does it work this way ?

    • Karthik Rangappa says:

      If this is the agenda then you are better off placing this as a single Cover Order

      When you place buy first and the SL-M separately there is no benefit of margin.

      • Man says:

        Yes Cover order packs all this in a single order system as explained in the article. But the catch is that its only to be used for “intraday”. But i use a swing trading system which would mean that cover orders can’t be used for overnight positions. Thus i can’t use this facility.

  13. Sumeet Nagar says:

    Suppose i place a NRML futures order today for asian paints. Tomorrow or any other day can i place a stop loss order for the initial asian paint order for that particular day? If yes, then how?

    • Karthik Rangappa says:

      Yes, once you enter a futures position you can set a stop loss for the same anytime you wish. However stoploss order placed today is not valid for t’row. So you will have to place SL orders daily. On your trading terminal, just choose SL as the order type to please your SL order….you can find all the details on placing orders here – http://zerodha.com/varsity/chapter/the-trading-terminal/

      • JAI DESAI says:

        Hi,

        Why do we have to place stop loss orders daily? Other platforms lets you keep stop loss order which is valid for 1 month. Why don’t you guys have this functionality. It is very inconvenient as for those taking multiple trades it gets time consuming just to place stop loss everyday.

  14. Sunil Tyagi says:

    Many thanks for this so very well explained chapter. However, is there a way to calculate margins in case someone places a BO or give SL.

  15. SARATH says:

    hi karthik,

    why bo not possible in mcx, is there is any option to trail my stoploss in mcx
    please explain!

  16. Seshadri says:

    for Nifty future trading, what percentage (points) at end of year is considered good performance? This info helps me in evaluating my trading system

    • Karthik Rangappa says:

      Well, the higher the better if you are a bull and the other way round if you are a bear 🙂

      • Seshadri says:

        Karthik, what im trying to aim is to benchmark the performance for my trading system by improving it. If a trading system produces 40% profits when traded with 1 lot on NIFTY future, I like to know on a average for succesful NIFTY Future traders,, what profit% is considered normal. maybe like tripling (3x) for making 5 times the capital.?

        • Karthik Rangappa says:

          Well, the profit percentage really depends on the risk you take. Higher the number of lots, the more capital exposure. Besides if you are trading BO/CO or MIS the the risk is also higher. So I would suggest you evaluate the profitability keeping risk in perspective.

  17. anthony kusumo says:

    thumb up for you … i desperately look for these information. will follow your blog. thank you!

  18. Anik says:

    Hi. Very informative article.. Are these options of CO and BO available in Kite ?

  19. Sooraj Jogendra Mishra says:

    Dear Kathik Sir,
    suppose I have 1 lot of Biocon @610 for a premium 10 and its a normal order..
    after two days premium was trading @ 20. Now I have to put a trail stoploss to my present normal order ( of 2 points) so that if premium becomes 18 I get out of trade automatically…
    is it possible to put a trailing stoploss to normal order??

    • Karthik Rangappa says:

      You will have to place the SL on a daily basis (as long as you hold the position). SL orders cannot be carried forward overnight.

  20. Sooraj Jogendra Mishra says:

    ok Sir… but suppose I have shorted ICICI futures @ 230 with stoploss 232 on MIS basis..later on the same day after half an hour its futures was trading @ 227..now what I want to do is put stoploss @ 229 so even if futures rises, I get out with profits…how I am gonna do that..?? coz I guess SL-M order does not work with Stock options/futures rather they require limit orders…right??
    I went for Trailing stoploss with BO but it doesn’t seem my cup of tea…!! plz clear my doubt…

  21. Sooraj Jogendra Mishra says:

    Thanx Sir, I went through your blog on BO…based on my readings I am putting following transaction in futures…plz tell me whether I am right or not…
    In the morning I shorted Bank of Baroda futures @146.85. In Braket order I put limit order @ 146 so that order gets placed instantly..
    then I selected absolute target points @ 6 (it means when futures reaches 140, my order would hit) I selected trailing stoploss absolute @3 points ( it means when futures touches 149 level, my trigger price would hit) then in trailing sticks I write 1 ( it means whenever my sale price moves from 146 to 145, my stoploss would move from 149 to 148)
    later after few minutes when futures price reaches 143 then my stoploss would be 146…..and when I hit ‘exit’ button then my buy order would get executed @ 143 and my profit would be Rs (146-143=3)..
    Sir is my observation right?? plz correct me If I am wrong…and sorry for bothering you to much…!!!

  22. Sooraj Jogendra Mishra says:

    Sir I tried myself today by taking risk with BO….n found its working….!!! Thanks…

  23. Sauvik says:

    Hello Karthik,
    One point is not clear.. What is the advantage of trading future in intraday.. I can simply do day trading with same stock and minimum lot size also not applicable.. is the margin required for both are different ?

    • Karthik Rangappa says:

      Well, as long as its intraday you can choose to trade stocks directly with the quantity you like…but if you want to carry forward the positions then you’d need to trade futures.

      • Sauvik says:

        Ok, but what is the advantage of doing intraday trading in future ? My question is why anyone will choose Margin Intraday Square off (MIS) option in future trade instead of doing trade directly..

        • Karthik Rangappa says:

          MIS offers higher leverage when compared to NRML. This means you can trade higher quantities. Or another way to look at this is – you can get exposure to a standard Futures contract by parking much lesser margin amounts under MIS.

          • Sauvik says:

            Hello Karthik,
            Really sorry to bother you again and again, I have understood the advantage of MIS over normal, but I an not clear the advantage of trading future in MIS in compare to directly trading on spot intraday basis.
            Any way thanks for all your explanation, you really have the magical power in writing….

          • Karthik Rangappa says:

            Sauvik – the best way to figure this out is by actually placing an order 🙂

  24. Sai Sreedhar says:

    Hi Karthik!
    Is trailing stoploss a common function in trading or is it a specific offer by Zerodha only?

    • Karthik Rangappa says:

      It is a common practice among traders, Zerodha made it easier for them by having BO 🙂

    • mvhemanth says:

      As far as i know Zerodha is the only firm offering Trailing SL…
      But only in BO…. I cant understand why not in all orders.

  25. mvhemanth says:

    I am manually trailing the Stop- Loss price in Normal orders on options.
    I wish the trailing feature were made available in Normal and Cover orders also.

  26. uday says:

    Hi karthik, excellent work from you,
    I have a small doubt , is the trailing stop loss feature available to the NRML product type ?, you said it is available only for BO type, but in table you have shown trailing stop loss feature in NRML type, can’we have trailing stop loss to other than intraday trading as you shown in table ?

    • Karthik Rangappa says:

      The assumption is that you manually trail the SL 🙂

      Unfortunately there is no trailing SL for NRML orders.

  27. srikantheswar says:

    Hi Karthik,
    Your work is great, easy to understand.
    I have a doubt with target in the trailing stop loss concept . Say I go long on at a price of 800 with target at 825(25 Pts) & SL at 790 (10 pts) & Trailing ticks as 4 points. (1) Market is bullish & market price moves to 810 so trailing ticks will be roundof (10/4)=2 so 2*4 i.e 8 points . SL now will be at 498. (2) trend continues & market reaches 824 (so 24/4) 6 trails & SL at 814 , now we are just 1 point to target ( or does target move when market moves upward for each trial (i.e 825+(6*4 )=849 Target & SL at 814 ) Values like when market price is at 824 my target at 849 (24 point+825) & stop loss at 814(24+790)


    Thanks

  28. srikantheswar says:

    Thanks for the reply Karthik, It’s 798 only not 498 typo error , My doubt is will the stoploss alone move accoring to the trend or the Target also moves just like the Stoploss?

  29. Ankur Agrawal says:

    I am trying to place a bracket order. But when I do the following message appears. Please help.
    “BO IS NOT IN THE ENABLED PRODUCTS CODES OF: DA6723”

    Also please tell me why is the ‘market order’ prechosen in cover order and ‘limit order’ prechosen in bracket order.

  30. raj_noojibail says:

    Hi Karthik, In the trailing stop loss table for Infosys at Trade Prices 2222 & 2235 it is stated that the the price has moved in trade favor by 15 points. Could you please reconfirm if it is 15 points as am getting 13 points (2222-2209) & (2235-2222). Please correct me if I am wrong

  31. thinesh kumar says:

    I have a case here. I bought xyz shares in future market at 50 rs. lot size is 50. now contract value is 2500. margin requirement in normal case is 20% of overall value. that comes out to be 500. but thats not the question here. now in case of cover order (order with stop loss) the margin is very much lower than normal margin..now i kept the stop loss as 45 rs ( hence my required margin is 250 rs). I bought shares at 11.00 am on day 1 and at the end of day 1 xyz closed at 47 rs(meaning that 150 is debited from my margin(3*50 = 150) ). Now the remaining margin is only 100 rs. I need to know on day 2 what will happen if prices move below 47 and also if prices go above 47.??? ( Is there any need to hold the new margin required for day 2…meaning that do i need to pump in more cash to maintain a similar margin as that of day 1)

  32. thinesh says:

    Thanks for the timely reply sir. here i have some more query.
    1. Going to zerodha margin calculator – selecting F&O – Under Exchange selecting MCX – Under symbols not able to find GOLDM..why?
    2. What is Gold M, Gold Guinea, Gold Petal? Do they have the same directional movement of gold? if so for a change in one tick what will be profit/loss for all the types?
    3. Going to zerodha margin calculator – selecting Commodities – Under Tabular column, I find Gold M – Normal margin is 15682 and MIS margin is 7841..Does it mean that if I have 15682 can i buy Gold M (100 gms) on delivery basis?
    4. Going to zerodha margin calculator – selecting BO & CO – Under segment selecting MCX – under symbol selecting MCX ..Price is 31365 and qty. is 10 and order is buy. Now if I set the stop loss as 30365 and click on calculate the stop loss automatically resets to 30770..I dont understand why this is happening..Is thr any specific reason for it??

  33. Sri Prapoorna says:

    I would like to know the bracket order margin required.
    suppose I want to sell bank nifty which is having a premium of 0.8rs and I had put stop loss of 7rs and my target price is 0.1rs. and I want to buy 10 lots of bank nifty. what is the margin required.

    I am thinking that marging required will be (7-0.8)*400 = 2480rs. I am thinking this as I am fixing my stop loss. kindly correct me in this regard.
    looking forward for your reply.

  34. Riyas says:

    What is the current avearage leverages for BO

  35. Abhishek kumar sah says:

    Lets say i have bought one lot of nifty fut. And after the margin amount is blocked i have another 30,000 left in my trading account. Now i if the prise fall below the exposure margin.. i will get the margin call. My question is as i have another 30k in my trading account so once the price falls below the exposure margin will the requires extra margin be automatically taken away form the left over money in the trading acount or i will get the margin call first and then the money will be taken?

  36. Abhishek kumar sah says:

    Also what happenes when i get the margin call? How much money do i need to pump up to get my trade going?

  37. Ashok says:

    Do I need to learn this margin calculation section? Because you have a beautiful calculator which does the job…

  38. Praveen says:

    Hi ZERODHA,

    I have 20K in my a/c as per margin calculator 1 lot of Nifty I can buy in MIS ( Intraday).
    My Question is in a trading day how many times I can buy/sell Nifty. Is any restrictions are there for intraday trading using MIS.
    Kindly clarify

    • Karthik Rangappa says:

      You can buy and sell multiple times. However, I’d advise you don’t try Nifty futures trading under MIS with 20K capital.

      • Praveen says:

        Dear Sir,

        Thanks for the clarification over Nifty.
        Same can be done in Equity Futures also??? Multipal times buy & sell using Bracket order???
        Ex. ITC buy with BO margin 14400 and sold.
        TATA Motors bus with BO margin 13563
        IDEA buy wih BO margin 19320
        Kindly do the needful

  39. Ram says:

    When can we expect bracket order for commodity?

  40. rakesh says:

    in this chapter, in topic 7.5, trailing stoploss…..you’re target was 2220 which has been hit on day 12, so after day 12 you’re position must have been squared off. how can you still be in the trade and trail sl? the last line is as follows-
    “Do note, the original price target was Rs.2220, but thanks to the trailing SL technique, I can ride the momentum and close in on a higher profit.”
    Does trailing the SL increase the target as well, as and when it moves in our direction,? So, this would mean there isn’t actually a target, it’s just that the SL keeps increasing and our position is squared off only when the SL is triggered. Thank u in advance.

    • Karthik Rangappa says:

      When you trail your SL, you are essentially locking in your profits, so it kind of gives you the freedom to ride the momentum. No hard doing this, especially when you have achieved your price target and locked in profits. Whatever comes next is just a bonus!

  41. Ayush says:

    I have few questions;
    1. BO & CO is only for intraday traders?(If so, why you mentioned day1, day2,………day15, in above example)
    2. Does these product type work as same in spot market?
    3. In spot market can i have the no. Of shares which i want and can get margin(leverage) on that shares?
    4. What if i dont want leverage in spot market, do i have to leave the product type blank or is there any other product type?

    • Ayush says:

      5. In the above BO example , isn’t that margin high, if the contract value fall by 4% my whole margin money will be vanished from my a/c, will it be right or stupidity to take that much of leverage?
      6. From above BO example, how to calculate % of pershare(418) which will be effected by the fall of 4% in whole CV amount?

      • Ayush says:

        7. Is there span and exposure margin included in the margin amount of BO, CO,MIS, NRML?

        • Ayush says:

          8. Why there is no options of BSE futures ?

          • Ayush says:

            8. Does BO, CO,MIS will automatically squareoff the position in case of, if someone forgot to squareoff his/her position?

          • Karthik Rangappa says:

            8) Yes, all are intraday positions and will be squared off. If you are likely to forget squaring off, then its best not to initiate the position. Even though these orders will get squared off at 3:20, its best if you yourself do this by around 3:00 PM. My experience tells me that there wouldn’t be much price difference between 3:00 and 3:20 PM….so you are better off closing the position yourself.

          • Karthik Rangappa says:

            1) In fact, there are no options on futures on NSE as well.

        • Karthik Rangappa says:

          7) Yes.

      • Karthik Rangappa says:

        5) Margin is not high, but the leverage is. Same with CO. MIS margins are a little lower compared to BO/CO, but lesser leverage
        6) Just calculate the drop in share price, multiple it with the number of shares, compare it with the money you have in account. You will know.

    • Karthik Rangappa says:

      1) Yes, they are intraday products – not sure where I;ve mentioned this
      2) Yes
      3) Check this – https://zerodha.com/margin-calculator/Equity/
      4) Use NRML order instead

  42. pushkar says:

    more the chapters i read a sudden burst of knowledge happens in my mind and it feels soothing.

    my doubt is with the F&O calculator and Equity Futures Calculator. Infosys is the stock.

    in F&O calculator https://ibb.co/ktQny5 the quotations is for a NRML order if i am not wrong and the total margin is 73,639

    where in Equity Futures https://ibb.co/g8UQkk calc the quotaion for the NRML order is 58,742

    why is there difference in the quotations ?

    also the price shown is 939.3 but the price shown on nse website and kite is 933.95? is it a updation delay ?

    • Karthik Rangappa says:

      The calculator takes out the previous day;s stock price, hence the difference with Kite and website. I’ll get back to you the difference in the calculator.

      • Sharath Mohan says:

        Hi Karthik.

        I’ve got the same query. Why is there a difference in margins quoted for F&O Futures and Equity Futures (NRML) calculations? Shouldn’t they be the same?

        Eg.
        F&O Calculator | SOUTHBANK 25-JAN-18 : Total Margin INR 1,65,042
        Equity Futures | SOUTHBANK 25-JAN-18 : NRML Margin INR 1,32,371

        Thanks.

        • The F&O Calculator calculates the margin based on the LTP and the Equity Futures shows the margin based on the previous day’s closing price
          But Sharath, the difference is minute and won’t be to the tune of 30k like you’ve mentioned unless there has been serious price movement on that day

  43. KUSHAN JOSHI says:

    Hello Karthik,

    Firstly, I would like to say that I’m glad, I’m reading these modules in 2017, cause if I were reading them in 2015, I wouldn’t have been able to wait for the subsequent chapters or modules just like you cannot wait for the subsequent episodes of your favorite season. These modules are that interesting.

    Second,
    I had a doubt regarding the example that you have stated in the BO section. When the price reaches 2220, which is our target, shouldn’t the trade get squared off? Why then, is the price still allowed to increase up to 2235?

    Thank You

    • Karthik Rangappa says:

      Thanks for the kind words, Kushan 🙂
      I’m glad you liked the content.

      I’m unable to spot where I’ve written this – as in the target increasing to 2235. Guess, its because of the trailing stoploss?

  44. Ankit says:

    Hi karthik
    I want to know BO can be placed for nifty options also in zerodha

  45. ankit.purohit says:

    Karthik, nicely written documents, I have been referring my friends and family to read here and realise potentials of stock market.

    I know I am quite late since this chapter was published years ago, i notice an error (or things have changed since this article was written). In the last table (INFY), you have talked about the trailing SL however trade is spanning in 15 days despite the fact that we are talking about BO which is an intra-day product.

    I am confused whether trailing stop loss is possible for deliveries as well?

    • Karthik Rangappa says:

      Good to hear that, Ankit.

      BO/CO orders are intraday orders. You cannot trail a delivery order. I must have written about it to explain the product better.

  46. Sanjay says:

    Is trailing stoploss order for intraday only? or we can place it for NRML also (I mean for the contracts carrying forward)?

  47. Muru says:

    Hello zerodha
    How to set stop-loss and for decimal values (.80 and .90) .. I feel the kite platform is not working.
    Also let us know what is margin required for call write.. in similified terms …

  48. Dr. Bharatkumar Bhate, Surgeon, Rajkot says:

    Dear Sir, I am not happy with the example given by you for trailing stop loss of 15 and stoploss of 25. So I have refered trailing stoploss in other agencies. I am pasting how they have explained to one of their client as under:
    Parth Trivedi says:

    August 17, 2015 at 11:26 am
    Hi Krishna!
    Thank you for your comment. Can you point out your exact trouble with the current example so I can form an example that addresses that issue in particular?
    For starters, you can say that A trailing stop-loss is a stop-loss feature in bracket orders that follows the market when it is in your favour.
    The usual case is where you put a stop-loss. The market comes close to your target but does not hit it and starts falling, then goes below your strike price and ends at your stop-loss. This will make you a loss. But if you could’ve sold the stock when it was above the strike price, you could’ve made a profit.
    A trailing stop-loss addresses this problem. You need to set a stop-loss as you do in case of a normal stop-loss. After this you set the trailing ticks. Or a number (step) by which you need the stop-loss to move every time. These are called your trailing ticks. Let’s say you set it at 2 points or 2 rupees.
    Once this is set, whenever the market moves up by the number of points that you set, say 2 in our case (let’s assume upward movement is profitable in our case), the stop-loss will come up by 2 points. So if the market was at 8540 (NIFTY) and you put a stop-loss at 8520 with 2 points or 40 ticks as your trailing ticks, when the market gets to 8542, the stop loss will become 8522. And will keep increasing every time the market goes up. Now if the market goes above 8560 (and let’s assume your target was at 8570) the stop loss will become 8540 which was originally your strike price. Now if the market goes to 8568, the stop-loss will become 8548. At this point of time, if the market starts falling, your position will square off once the price reaches 8548 (since that is the new stop-loss) and you will make an 8 point profit instead of making a loss.
    I hope this example helped you understand the concept better. If you still have doubts, as I said, write back here with your specific confusion and we will solve it for you.

    I request you to give me any other example and explain how it works.
    Thanks,
    Dr. Bharatkumar Bhate

  49. Swathi says:

    Hi Karthik,

    I would like to thank you for the nice article..! 🙂

    coming to the query in section 7.3 task no 2, you have mentioned that margin required for NRML is more than it is required for intraday when the duration for both the orders is the same( 1 DAY ) just wanted to know why is the difference .

    • Karthik Rangappa says:

      When you place an NRML order, you are essentially carrying it forward to the next day….and technically can carry it forward till expiry. Hence margins charged is higher. If your intention is to do an intraday, you are better off placing an MIS order.

  50. Muruli says:

    Hi Karthik,
    can we trade the Futures using the Bracket order ?
    currently i tried and i am getting the error as below:
    “Exchange entered is not in the enabled exchanges of : XXXXXX”

    Warm Regards,
    Muruli

  51. Muruli says:

    Hi Karthik,
    update on the same question ?
    can we trade the NIFTY Futures using the Bracket order ?
    currently i tried and i am getting the error as below:
    “Exchange entered is not in the enabled exchanges of : XXXXXX”

    Warm Regards,
    Muruli

  52. Kaushal Singh says:

    Dear Karthik,
    Thanks for all the useful tutorials at varsity.
    I have one query regarding stoploss table. If price moved in my direction by 15 then stoploss should also have moved by 15, so from starting 2150 it will move to 2165 and it will keep on moving only by 15 points 2180, 2195,2210,2225..
    Pls clarify..

  53. Ishan Choubey says:

    hello,
    karthik this order placing terminal of yours has too old looking interface. Are you guys still providing this bad looking terminal to your customers. Is there not any upgarde to this interface.
    Wanted to know because i want to use zerodha’s platform for trading.

  54. ARUN says:

    Hi karthik,
    Can u plz tell where can i get the list of small & mid cap stock in NSE website or if in KITE displaying current market price,volume,high,low etc etc?

    • Karthik Rangappa says:

      Kite has a universal search box where you can search for whichever stock you need!

      Yes, kite besides giving you a great transaction experience, also provides you with all the information you need before placing the order. This includes LTP, volume, OHLC etc!

      Happy trading 🙂

  55. ARUN says:

    Hi karthik,
    If i see a chart forming a valid CS pattern and i buy the contract at 3:20 pm ,I will b buying as NRML product type right???
    Secondly if next day morning i want to specify the SL ,can i put a stop loss to my contract?
    Thirdly, Can i trail my stoploss…if i see profit moving in my favour although its not mentioned in your chapter but i think it should have this feature???

  56. Hitesh says:

    I understand the concept of margin and why it is required.
    Q1) However how it is calculated is still a question, is there a formula for it which I can put in excel to avoid comming back to zerodha margin calculator page again and again (nothing bad in the page, just that entering values everytime takes times).
    Q2) Also tried some market neutral strategies for example: (as on date 18th Oct 2017)
    Short a future of Maruti with strike price ₹ 7,808.
    Buy a call option of Maruti at strike price of ₹ 7,800 for ₹ 91.
    Write a put option of Maritu at strike price of ₹ 7,800 for ₹ 83.3.
    All instruments have same expiry date 28th October.
    Now this trade seems to me as market neutral with arbitrage oppertunity. My question is that if I am not exposed to the market fluctuations why am I required to hold margin with the exchange? Am I missing on some risk I am still exposed too?

    • Karthik Rangappa says:

      1) The margins calculation formulas are proprietary to CBOE and have been licensed to the exchanges. This is called the ‘SPAN Calculation’, techniques. Hence the formulas is not freely available
      2) The risk is no just directional. There are other types of risk – execution, liquidity etc.

  57. Zia says:

    Hi,

    I have been reading these modules for quite some time but I don’t seem to find any information on BTST/STBT. Can someone guide to find it?

  58. jyotshna says:

    I didn’t find basket order in kite.
    Basket order means, If someone wants to place 10 orders at a time, he can’t place, he has to place 1 by 1.
    Consider this, in weekend I have done some analysis and I want to place say 9 order of different stocks some short and some long (bracket order), And I want to place when market opens, no delay. I have seen this in ICICIdirect

  59. Dr.rajesh says:

    Thanks… From above information, I got to know that

    1)Stoploss and take profit can be used to futures too
    2) Intraday and nrml can be used to futures too.
    whether we can shift intraday to nrml and viceversa.. if we have sufficient amount in the trading account?
    Are any extra charges laid if we use BO and CO?
    kindly reply me

  60. Dr.rajesh says:

    Can I use BO and CO for nrml equities too?
    or it is available for only intraday?

  61. Amrutha Shekar says:

    Hi,

    If i want to buy futures of normal type on last Thursday of month suppose today so should i have to choose future validity of JAN 2018 since its of normal type not an MIS?

    Thanks,
    Amrutha

    • You could have traded both Dec 17 and Jan 18 contract today.
      If you used MIS, the contract would be squared off at 3.20 PM regardless of which month’s contract it is.
      If you used NRML, the Dec 17 contract will be exercised by the exchange and you will receive the cash settlement on T+1 day. Jan 18 contract will remain with until you choose to square it off or till it expires on 25th of Jan 2018

  62. Amrutha Shekar says:

    Hi,

    When we buy futures of NRML type for P&L calculation of the day will it be considered closing time price at 3:30 or usual market square off time price at 3:20 ?
    If the NRML future looses its early session gains during the closing hours then have to suffer from huge losses right if we don’t put stop loss.
    Most of the time when i try to put stop loss it will show like rejected may i know the reason please.

    Thanks,

    • Karthik Rangappa says:

      For M2M calculation, it will be the market closing time.
      Yes, whatever is the closing price, the same will be considered for the P&L calculation.
      The rejection reason will be specified, suggest you look at that.

  63. Amrutha Shekar says:

    Hi,

    Can we buy or sell the future of NRML type after 3:20 PM, we know for MIS there will be square off around 3:20 PM.

    Thanks,
    Amrutha

    • Karthik Rangappa says:

      Yes, you can. In fact, the only way to carry forward a derivative position overnight is by opting for the NRML product type.

  64. Karan says:

    Hey Karthik. Great Explanation as always. Thankyou 🙂 . I had a few questions if you could please address :
    1 Whats the point of having Span Margin Section in Zerodha, one can calculate the margin easily using the Equity Futures section. Is there any extra feature in Span Margin that I am
    missing out .
    2 These margins for future contracts are decieded by NSE or it varies from broker to broker.
    3 What does Zerodha nd Other Brokers normally do , when the margin balance falls below the maintaince margin during the market time. Do they square It off or call the client or what ?
    4 Also in a case like Satyam , when the share & future value fell 70/80% on a single day. Say I was long on Satyam through futures, and I am unaware abt the falling future price of it ,
    what will happen after my entire margin is wiped out , will the broker use any of the cash balance of mine that may be available with him , to keep refuelling the margin.
    Basically my fear is this if that if I have a position on futures and there is a drastic change in the price movement on the other side of the my position , what will happen will my
    margin balance will only wipe out or my complete account will get wiped out (i.e. whatever the cash balance is there with the broker everything will get wiped out.)

    • Karthik Rangappa says:

      Karan,
      1) You can use the SPAN margin to calculate margin benefit when you have multiple option position which when combined together, reduces risk. Try experimenting this section with a call and a put option position
      2) It’s by the exchanges and brokers
      3) Yes – this is a standard practice amongst brokers who have good risk management practices
      4) Yes, the broker will cut your position as and when it goes below the stipulated level. In case the losses exceed, then he is entitled to recover the losses from the available cash margins. For this reason, you need to track your futures position carefully.

      Hopefully, the answers above should give you a perspective on what is likely to happen to your futures position in case of a shortfall.

  65. sravan says:

    Hi sir,
    As u said stoploss order’s are only for intraday(derivatives and non derivatives)
    my question is how to place a stoploss order for non-delivery,what ever the product type may be(derivatives or non derivatives)
    Thanks in advance.

    • Karthik Rangappa says:

      You can place the stoploss across any segment. However, you cannot carry forward the stoploss order overnight.

      • sravan says:

        Thank you sir,
        In that case how to deal with the overnight risk in the market’s???
        Let’s assume this way
        I placed a stoploss for xyz share today which I can’t Carry forward to tomorrow,and as the market’s open tomorrow let say that stock opened with lower circuit??
        In that case how to protect my capital?
        2)sir can u plz say what is reason behind that not to carry stoploss for delivery trades.
        3)does all brokers in India only allow stoploss for one day or it varies from broker to broker.
        Kindly answer my questions.
        Thanks in advance sir.

        • Karthik Rangappa says:

          The overnight risk is perhaps one of the biggest risks a positional trader carries. This is a standard practice amongst brokers.

          • sravan says:

            Thank-you sir,
            As I go through the module and comments I have been stucked with few more questions???
            1)If we have to place a stoploss on day to day basis than do we have to pay the brokerage for that on day to day basis even if we don’t exit from the script?
            2)in MIS,BO&CO can I change the stoploss or target price multiple no of times accordingly,for doing so is there any Levy on me.
            Thanks in advance.

          • Karthik Rangappa says:

            1) No as brokerage is charged only on executed orders.
            2) No charges for order modification.

  66. sravan says:

    Thank you sir for your timely response.

  67. Ash says:

    Hey Karthik ,

    The margin for MIS Nifty Futures is mentioned as 40%. So does it mean if I have money for 10 lots of Nifty future index, in intra day I can buy 14 lots (40% more)?

    Please tell me how many nifty 50 index future lots I can buy in intra day if I have the money to buy 1 lot in positional? Like how many time more can I buy.

    Cheers.

  68. Bhavik says:

    Hello sir,
    I have only do intraday in equity, not for future and option.
    I have some query on margin/leverage provided by zerodha in equity intraday.
    If i have only 50000 in my account and zerodha give margin up to 5 times in intraday. Then i have now purchase share of total 250000 rupees. Suppose value of stock is 100 rs. Then i bought 2500 shares for intraday.
    Now suppose that day stock value decrease and down 50 rs. Than total loss is 2500 *50 = 125000 . Now actually i have only 50000 rs. So my maximum loss can be up to 50000. Now who will be pay other 75000 loss? Can zerodha call me for deposit other 75000 rs.?

    • Karthik Rangappa says:

      No, any trade that goes below the margins required will be closed by the risk management team.

      • Bhavik says:

        So you say that order squared off automatically, right?
        Then which time that can be square off?
        Is there any loss percentage are there to be triggerd?
        What is maximum loss from my side?

        • Karthik Rangappa says:

          The moment the order gets below the stipulated margins, then order gets squared off. Else, if its an intraday trade, it would be squared off by 3:20 (in case you do not initiate the sq off yourself).

  69. sahil swaroop says:

    there is no bracket order for swing trades?

  70. R V Prakash says:

    A quick question on the margin calculator.
    While shorting index options, do I Need the actual total margin or the total margin minus the premium receivable ?
    Here is an example

    Nifty 9000CE 28 March 2018

    Span
    Rs: 1,29,623

    Exposure margin
    Rs: 23,425

    Premium receivable ?
    Rs: 1,06,148

    Total margin ?
    Rs: 1,53,047

    What will be the amount required in my account for shorting 1 lot and what will be required amount of I were to subsequently short a second lot after shorting the first lot both as separate orders.

    • You will require the Total Margin to take the position. Premium receivable is only credited to your Account on T+1 Day.
      The same margin requirements will be applicable for the second lot too

      • R V Prakash says:

        So if I place the second order on the next day.. I just need the balance amount of the total margin minus the premium receivable from the first left? Is my understanding correct? Also Will I be able to withdraw the premium received after it is received?

  71. Sonu says:

    For trailing stoploss example I think stoploss and target was set manually for every 15 points desired move (help me here if I am wrong) cause in BO points and trailing SL move together i.e. If we put 1 trailing stoploss the stoploss will move 1 point for same
    point movement in our direction.

  72. Kishan Modi says:

    Hi Karthik,

    In Trailing SL example, why is SL increasing by 25 points for every 15 point movement in price? Why is this 25 points each time?

    Thanks for your great work!

  73. Abhishek rai says:

    Sir
    What is difference between future and equity future.

  74. rajendra says:

    Hello Karthik Rangappa

    If I place a BO order to buy 100 share and its got executed in to 6 order, does that mean Brokerage will charged for 6 order.
    I heard In BO/CO it will be charged on every order executed, in the above case 6 SL order and 6 target order, so total 12 is this right?
    please clarify this point. I am confused about the brokerage charge completly.

    • Rajendra, you will be charged only once for the buy(entry) order, i.e., 0.01% of order value or max ₹20.
      However, for the sell, since 6 orders will get executed, you will be charged 6 times(0.01% of order value or max ₹20). 12 orders will placed(SL and Target) but only 6 will be executed and you will be charged only for the executed ones

  75. Daniel says:

    Dear sir, would like to know why the leaverage has been reduced from 56.5x to 33.3x for BO and CO ? 🙁 🙁

  76. Nino says:

    Can you tell if the information filled in the RMS system is visible to others. I am asking because if the people who have the money like fund mangers etc can manager the trade and put the small retail trades out as the many times yhe stoploss will get hit and we will slowly lose out on many trade.

  77. uday says:

    Hi

    Just wanted a clarity on Nifty IT.

    In order to buy one lot of Nifty IT under Bo Co order, the exact premium shows as infinity, any particular reason for this ?

    Can any light be thrown as to how much funds are required to buy one lot of nifty IT under Bo Co ?

  78. arun says:

    Thanks a lot for this. Getting confident chapter by chapter 🙂

  79. Chanu says:

    for example, if I want to place an order and having 50k in my Zerodha ac, can u tell me possible scenario placing an order as :
    F&O / Equity futures / Equity / BO & CO

    Please Took Bank of Baroda As share purchased at opening 149 sold at 152 highest o day 30-7-18. Please include margin in possible order.
    Thank you

  80. Chanu says:

    No Margins for Avenue Supermarket ltd? Why? FnO, Equity, nothing why?? even all technical indicator are in favor. bullish trend.

    • 1. DMart isn’t an F&O trading stock.
      2. We provide 3X leverage for Intraday Equity(The same information is available in our Margin calculator).
      Chanu, I’d request you to check the Support Portal before posting here. All your queries are already answered there

  81. Chanu says:

    does zerodha has screener?

  82. Guru says:

    Hi Karthik,

    Can you please share your inputs on the below?

    1. Can intraday buy first – sell next positions on equity shares (spot market) be converted to long ( to hold for more than a day)
    2. Can intra day sell first – buy next position on equity shares (sport market) be converted to long?
    3. Can intraday buy first – sell next positions on equity futures be converted to long ( to hold for more than a day)
    4. Can intra day sell first – buy next position on equity futures be converted to long?

    I’m thinking the answers are yes, no, yes, yes. Am I right?

    Kind regards,
    Guru

  83. PT says:

    Suppose i have short option position on expiry day say 2lakh and the option expire worthless and i did not square off position , will my blocked margin would release on same expiry day only and would i be able to withdraw that amount on same evening or not

  84. Nish says:

    What is the span and exposure margin in case of mis trade as you have mentioned that mis margin is usually very less w.r.t nrml margin

  85. Pranab says:

    Recently I was planning on opening an account in zerodha. So I did my due diligence and i find out from quora and twitter that there’s been a lot of technical glitches going on the zerodha’s trading platform. And people are losing tons of money because of it. So I’m rethinking my position about opening an account in zerodha.

    • Karthik Rangappa says:

      Pranab, we have over a million customers, of which very few make a big deal of small issues online. Please do check our ratings on Google and also playstore. I’d suggest you experience Zerodha and build your own opinion.

  86. ricky says:

    does increase in implide volatilty figure displayed on nse option chain increase or decrease the margin required for shorting options as the case may be .
    Also while trading in same day i see margin available and margin used constantly changing for nrml positions and also change by substantial amount so how this work does margin change happen end of the day or constanlty.

    • Increase in IV increases the margin requirement to take an F&O position as the price risk for the contract has increased.
      The margin used/available keeps updating based on the marked to market losses/profit constantly. This way you are informed if your account balance is in negative and you’d need to add funds to continue holding on to your position.

  87. Dan says:

    Hi Karthik,

    I have a query regarding the BO orders. Is it possible to place a trailing stop loss (BO) on an open long option position?
    Let say i have an open CE position for Auro Pharma expiring on 25th Oct, can i place a BO order to set a trailing stop loss on this position ?

    Thanks.

  88. Bharath N says:

    Enjoying these classes on futures! Kudos to the entire team for your exceptional work.

    If you had written a book , you would mint money, unlike other garbage books out there which confuses the reader with heavyweight jargons , your articulations are much better than most of the books I wasted my time on!

    • Karthik Rangappa says:

      Hey Bharath, that’s very big of you to say that 🙂

      The idea with Varsity is to educate everyone with an intent to learn about markets, for free. We will strive hard to keep it that way 🙂

  89. Mani says:

    I am using kite api for trading. Is there a formula or documentation for zerodha margin calculator, so that my algo can properly manage risk before placing option spread orders. I tried kite forum sir but got reply that it is out of scope for them. Can you guide me sir?

  90. prakhar says:

    when there is margin shortfall for short options there is margin penalty. Does that means that if someone is ready to pay margin penlaty then he can take the position from less then sufficient margin and pay margin penalty.

    • Karthik Rangappa says:

      When you are short of margins, you either need to add more funds to satisfy the margin requirements or close the position. You cannot carry forward the position with less margins.

      • Prakhar says:

        There are many times when after taking position my margin available became negative for one or two days but my position had been carryforward and I paid certain margin penalty.thanks

  91. Anuragh says:

    Hello Karthick,
    1.How do I post a screenshot in this post , I have tried using the Print screen option but doesn’t get pasted here .

    The query is about Trailing stop loss from Intraday Perspective
    2. In the New Kite version I can see Stop loss , Target , Trailing stop loss , I understand Stop-loss can be mentioned with regards to my risk appetite but Target and Trailing stop loss is something is I always miss on It .

    Let me explain my scenario with an example
    I buy a long position with EMA and expect the stock price to move up and it does move up after a EMA cross over and I wait for some time to sell it off at a point when it reaches to the top but I understand no can determine the peak position and it starts going down after it has achieved its peak .
    a)How do I determine the ” target” for any position that I create long/short
    b) how do I implement the Target in the kite platform . Is it just putting the Intended price I can expect it to touch
    c) what value should I put in “Trailing stop loss”, am Little confused in that part . Can you please explain me in detail on this .
    Thankyou in Advance.

    • Karthik Rangappa says:

      1) You can upload this on Google Drive and share the link
      2a) This is a tough ask ;). I usually look at the immediate resistance for placing targets for long positions.
      2b) You can choose SL limit to sell at the target price and book your profits. Alternatively, you can use a bracket order.
      2c) This depends on how you want to trail. If I’m trading Nifty intraday, I’d trail by 10-15 points everytime the index moves in my favor.

      • Anuragh says:

        In response to your Responses to your previous mail,

        2a) How about for Short Position , Is there any logic or is it when it starts retracing back I buy back the stock at any given point
        . Your suggestions please
        2b) In Bracket Order how would I mention the Target without knowing how much peak/Bottom it can go . Is it necessary to mention that value ?
        2c) what would be your suggestion for Individual stocks,what is the ideal price points I should keep as trailing stop loss

        Thankyou in advance

        • Anuragh says:

          In response to your Responses to your previous mail,
          2a) How about for Short Position , Is there any logic or is it when it starts retracing back I buy back the stock at any given point
          . Your suggestions please
          2b) In Bracket Order how would I mention the Target without knowing how much peak/Bottom it can go . Is it necessary to mention that value ?
          2c) what would be your suggestion for Individual stocks,what is the ideal price points I should keep as trailing stop loss

          Also you had mentioned about a WhatsApp group that you have . Is that for sharing updates or what’s it for . Can I also join if yes what’s number to join.
          Thankyou in advance

        • Karthik Rangappa says:

          2a) For short positions you can look at the immediate support as the target price. You can even trail the position by locking in certain points
          2b) No one can really call the top and bottom in the market, so your guess is as good as mine 🙂
          2c) Think of it in % terms. For intraday, maybe lock in every quarter percent move?

  92. Praveen says:

    Hi,

    Zerodha is charging Call and Trade Charges for BO/CO. Is Call & Trade Charges will be charged if I place MIS orders for Intraday.
    Please confirm.
    Thanks.

    • Karthik Rangappa says:

      The Call and Trade Charges are applicable when you call the support desk to close a position or when you don’t close an MIS/BO/CO position and we will have to do it on your behalf.

  93. Radhakrishnan says:

    Hello Karthik, i am new to trade and learning things and following your post.. i need you to guide me on this topic

    how to make my amo order successfull. Previously i tried but didnt execute. how amo order works and what type of order should i place. MKT or LMT or SL … any material to learn about this..What is the percentage of getting amo order successfully executed.

    • Market AMO orders are more likely to execute during the pre-open as long as there are buyers/sellers in the scrip you are trading. Limit AMOs will get completed based on the price you have placed it at.

      This article on the Support Portal has more details.

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