At Zerodha you can open an Equity & Derivatives Trading account, Demat account and Commodity Trading account. Let me explain what can be done with each of these accounts:
Equity & Derivatives Trading Account
An Equity & Derivatives Trading account is what you open with a Trading Member (Stock Broker) of a recognized Stock Exchange (presently NSE,BSE and MCX-SX in India). A Trading account is the account to which you transfer funds and then buy/sell stocks, Futures & Options.This can be done, either online or offline.
In an offline Trading Account, the only way you will be able to trade is by calling your broker or by visiting his premises.
At Zerodha we offer only online Trading Accounts and you will have an option to trade either through a software based platform, a web based platform or a mobile application. We also offer a Call & Trade option, in case you don’t have access to any of the platforms.
All settlements on a Trading Account happen on T+1 day. So what it means is if today (T day) you make a profit of Rs. 10,000, you will be able to withdraw this profit only on T+1 day. You can however utilize the Rs.10,000 profit to take a fresh position on the same day (T Day).
With a Zerodha online Equity & Derivatives Trading Account you can trade Stocks, Futures & Options of Stocks, Indices and Currencies. There are no Annual Maintenance charges for a Trading Account.
Equity Demat Account
Dematerialized Account popularly known as Demat Account, is the account where you keep stocks in electronic format. Similar to how a Savings Account allows you to keep money in electronic format, a Demat account allows you to keep stocks in electronic format. In essence a Demat Account is a safe storage for your stocks and this is the only use of a Demat Account. Whilst opening a Demat Account you’d be required to sign the Demat Form and the Power of Attorney. Click here to read as to why you’d have to sign the PoA.
For all those who trade only Futures & Options, please understand that you don’t need a Demat account regardless of whether you’re an Intraday trader or a positional (overnight) trader. All Futures & Options are contracts which have an expiry date and hence there is no concept of a Demat Account for trading Futures & Options.
Presently in India, we follow a T+2 rolling settlement cycle for Delivery based trading. What it means is that if you buy 100 shares of Reliance on Monday (T day as we call it) for delivery, the shares will come to your Demat Account only on T+2 day (Wednesday evening). Similarly when you sell stocks from your Demat Account, you’d be able to withdraw the money (Sale credit) only on Wednesday (T+2 day), you can however use the credit on T day itself to make fresh purchase of Equities. Once the stock is in your Demat Account, you can keep it for as long as you want. Annual maintenance charge (AMC) for a Demat account at Zerodha is Rs.300 which is collected at the end of the financial year on a pro-rata basis and the Demat account opening charges are Rs.100
Commodity Trading Account
A Commodity Trading account is what you open with a Trading Member (Commodity Broker as you call him) of recognized Commodity Exchange (MCX, NCDEX etc. in India).
Similar to an Equity Trading Account, you will have to transfer funds into your Commodity Trading Account before trading Commodity Futures (Commodity Options have still not started in India). All settlements again are done on a T+1 day basis. If you make profits you get it the next day, but if you make a loss it is debited the same day.
There are no Annual Maintenance charges for your Commodity Account at Zerodha and you can trade on MCX (Multi-Commodity Exchange). Only futures trade on MCX and hence there is no need of a Demat Account for trading Commodities. At the end of the contract, the Future is cash settled (if you haven’t already squared off the position) or you can opt for physical delivery (not allowed at most of the online broking firms, including Zerodha).
Important things to remember while opening an account with us:
1. Open only “Trading Account” if:
You intend to trade only Futures & Options and/or Currencies, be it Intraday or Positional. Demat account is not required.
2. Open “Trading and Demat” if:
You intend to take delivery of Stocks (buy and hold stocks overnight) along with trading in Futures & Options and/or Currencies.
3. Open “Commodity Trading Account” if:
If you intend to trade only Commodities.
Welcome on board,