Use of fund from pledging in F&O

Need Help ℹ️
1

I am pretty confused about use of funds from pledging. I asked customer support but received different answers.

My question is - Can I use funds gained from pleding ETF in F&O, and is there any time limits to return the funds or the F&O positions can be opened until expiry or the position is covered.

Thanks

2

Hi @Jaskaran, welcome to MadeForTrade!

Yes, you can use the pledge margin received from any scrip 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.

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3

Hi @Sameet,

Thanks for the clarification.
Example - I received Rs 5 lakh from pleding shares and then I have my own capital of 10lakh, so total 15lakh capital.

Now how it will be distinguished for Option buying, the capital is used from pleding shares or from my own capital? Usually I open a future position and then hedge it with buying option so looking for some clarity how this will work.

If a Future position is in loss, and I have capital to main the margin, this will also trigger negative ledger?

Thanks

4

Hi, for option buying, your own capital will be used, as it will appear as a debit bill in the ledger.

For futures positions, if your pledged amount includes cash components, it will be used first to maintain the required 50:50 margin. In case of a loss, your ledger will be debited and adjusted against your own capital. If the required margin is not maintained, the ledger will go negative, and an auto square-off will occur within T+5 working days.

You can read more about “Margins & Availability of Additional Cash for Withdrawals on Dhan” here.

To learn more about cash and non-cash component scrips, please click here.

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5

Thanks, so this means my F&O postions dont have time limit and I can sqaure off according to my will.

Is there a time limit to use the fund after pledging the shares or I can keep the funds in the account and use it as I find an opportunity?

6

You are required to clear any negative ledger balance within T+4 working days. On the T+5th day, the system will automatically square off the position to settle the outstanding debit amount. You may read more about the Ageing debit square-off here.

Future Buy/Sell and Option Sell positions can be held until expiry, provided you maintain sufficient margin to cover any shortfall or MTM future losses that may result in a negative ledger balance.

7

I need clarity in options selling segment.
If the margin I get is from pledging cash equivalents i.e. Govt bonds, G secs etc.
Then 50-50 ratio is maintained as 100% margin is from cash collateral.
Still any interest will he charged on overnight position?

8

Hi @Shreykhemka,

In this case, margin interest will not be charged since the required margin (at least 50% in cash or cash collateral) is maintained.

You can carry forward your option sell position; however, please note that brokerage and government charges will be deducted by the end of the day. This may result in a negative balance in your trading ledger. If your account goes into a negative balance, Delay Payment Charges (DPC) will be applied.

9

Got it. Thanks.

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