Comment on Basics on SLB (Stock Lending & Borrowing)

Rajiv commented on 08 Oct 2015, 04:58 PM

Nithin,
Thanks for the article. You write:- “Though 125% of the margin is blocked, once the borrower gets the share and sells it in the market he gets back the value of the stock on T+2 day, effectively blocking only 25% margin.”

Is there any restriction on this 100% margin that gets unblocked on T+2 after stock gets sold? Say, I borrow 100 shares of Reliance trading at 890. Current ask price on SLB is 0.5. So, it will cost me 0.5*100 = 50 Rs. Also, I need 125% margin. So, I need 125% of 89,000 = 1,11,250 Rs in my account. Immediately after borrowing on SLB, I sell 100 shares of reliance at 890. 89,000 will get unblocked on T+2, so on T+2, my account will show 100 short Reliance and 89,000 Rs cash. Is there any restriction on this 89,000 Rs cash available in my trading account?

Specifically,
1) Can I use this 89,000 Rs to buy 89,000 Rs worth of another company’s shares, so that I have effectively a long-short strategy in my account?
2) Can I use this 89,000 Rs as margin to buy futures/options?
3) Can I use this 89,000 Rs as margin to write options?

Please also answer:
1) Since I am using only 22,250 (=1,11,250-89,000) to control 89,000 worth of stock. Will Zerodha or ISSL charge me any interest rate on 89,000-22,250 = 66,750 Rs?
2) What would be the processing fee levied by ISSL + service tax for this Reliance transaction? Article said – “this would be a % of the lending fees.”

Please clarify thanks.

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