Can we use pledge margin for overnight F&O Position?

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1

Can we use pledge margin for overnight options position? If yes then is it required 50% cash or cash equivalent margin for the same ? THANK YOU @Dhan

2

Hi @TradeWithAB,

Yes, you can use the pledge margin to trade in all segments, you need to maintain the negative ledger balance to avoid ageing based square-off.

Below are the scenarios for each segment when utilizing a 100% collateral amount without a cash balance.

Equity Delivery and Option Buying:

  • The amount will be debited, resulting in a negative ledger, which triggers the T+5 ageing debit square-off policy.
  • Margin interest will apply only for the day of the Equity Delivery purchase.
  • DPC interest will be applicable on the negative ledger.

Option Selling:

  • Span and exposure will be blocked, but not debited, so there won’t be a negative ledger.
  • You can hold your position for the long term, as long as you maintain any additional margin requirements that may arise.
  • Margin interest will apply since the 50:50 cash to collateral ratio hasn’t been maintained until the position is closed.

Future Buying or Selling:

  • Similar to option selling, span and exposure will be blocked but not debited, avoiding a negative ledger.
  • Since MTM (Intraday) profit or loss is settled on the same day, you need to cover any losses to avoid a negative ledger.
  • You can hold your position for the long term, provided you maintain any additional margin requirements that may arise.
  • Margin interest will apply as the 50:50 cash to collateral ratio hasn’t been maintained until the position is closed.

Please note that if the ledger goes negative due to margin requirements or MTM loss in futures position, it will trigger the ageing debit policy. You may read more about DPC in our Risk policy under “Delay Payment Charges” here.

Hope this clarifies your query.

4

How much is the DPC Charges on dhan?

5

Hi @TradeWithAB,

The DPC charges are 0.0438% per day on the negative ledger balance.

6

hi sameet
can you give us a real life example of buying stocks (equity delivery) using pledge margin so that we can deeply understand what are the charges & interests that are applicable, as well for how many days we can hold that trade,

7

Hi @market_edge, Sure! Let me walk you through a clear example to help you understand how buying stocks using pledge margin works, what charges apply, and how long you can hold the stocks.

Account Summary:
Opening Ledger: â‚ą0
Pledge Margin Available: â‚ą1,00,000
Available for Investing: â‚ą1,00,000 (from pledged stocks)

Let’s say you buy 20 quantities of ABC Company on Monday at ₹500 using only pledge margin. That makes your total buy value ₹10,000. Since you used only pledge margin and had no cash, your ledger becomes –₹10,000 after the trade. You can hold the stocks for T+4 trading days. On the T+5th day, the system will auto-square off your stocks to clear the negative ledger if no cash is added.

Let’s now look at the applicable charges:

DPC Interest (Delay Payment Charges): Since your ledger goes negative from the day of purchase, you’ll be charged 0.0438% per day on the negative balance of ₹10,000, which equals ₹4.38/day. So for 7 days, the total DPC interest would be ₹30.66.

Margin Interest: As per regulations, a 50:50 ratio of cash/cash components and collateral is required as an upfront margin. For your â‚ą10,000 buy, the minimum VaR+ELM margin (say 20%) is â‚ą2,000 (â‚ą1,000 in cash and â‚ą1,000 in collateral). Since you only had pledged margin and no cash, the shortfall of â‚ą1,000 in cash attracts margin interest of â‚ą0.438 (0.0438% of â‚ą1,000), charged only on the day of trade.

Note: Pledge margin is provided by the broker, which is why it is not added to the ledger balance. Additionally, normal government charges such as STT, GST, Exchange Transaction Charges, SEBI fees, and Stamp Duty will also be applicable as per standard rates.

8

Hi Sameet, If I have pledged a GILT ETF (which is considered as a cash component) then would the interest on the negative balance sill apply?

9

Welcome back, @nshah265! Great to see you after a while.

If you have a cash component, it will be used to meet the 50:50 margin requirement on the trade day for equity delivery, so no margin interest will apply.

DPC (Delayed Payment Charges) will be applicable when the ledger goes negative. You can hold the position till T+4 working days. On T+5, if the cash margin is not maintained, the position will be auto squared off to cover the shortage. You may read more about the Delayed Payment Charges and Ageing based square-off in the risk policy here.

10

Hi
I have i,e 1L of pledge margin and 0 in account ledger taken an 70k worth positions in overnight option selling,though not maintaining 50:50
1.what happens if positions goes against with 20k loss and its get adjusted balance 30k from pledge margin available ?
2.And same T5 days it will be squared off?
3.Or will i hold the positions and adjust the loss by adding margin amount only ?
4.For entire 50 cash non maintain I’ll occur interest till the position hold ?

11

Hi @Balasv52, here is the answer as per your mentioned scenario.

  1. Yes, the position will be adjusted using your remaining margin balance, including the pledge margin.
  2. No, as you receive the option premium credit in your ledger, resulting in a positive balance, the T5 ageing square-off is for a negative ledger.
  3. You can hold the position as long as you fulfil the margin requirement.
  4. Yes, in this case, the per-day Margin interest is applicable on 35,000 or 50% of the margin used till you hold the position.
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