Having an account with Zerodha, and now looking forward to earning more profits with margin trading? If yes, then here is the complete detail of what is margin in Zerodha?
Before explaining this concept, let’s clear one fact in the stock market if you are having limited funds, you can borrow money from your stockbroker. Now when a stockbroker provides you with additional funds it asks you for collateral in order to cover the credit risk.
Now here comes the term margin, which defines the amount that the investor keeps in his or her account as collateral. Buying on Margin is like a loan where you can buy more stocks by availing the fund from your stockbroker.
Since there are different types of trading segments (equity, intraday, futures, and options) so does the leverage percentage.
Starting from intraday, how much leverage Zerodha gives for intraday?
For intraday trading, the leverage amount is 20% or 5x. To understand this, let’s consider an example.
Let’s suppose you have ₹10000 in your account, now against this amount you can avail up to 5 times the margin from Zerodha, i.e. up to ₹50,000.
This allows you to buy more stocks and hence the chance to earn more profit.
If you do not have enough cash, you can pledge shares in Zerodha to avail of the margin facility. Here you can keep your shares as collateral corresponding to the minimum value required to avail margin.
Further, there are terms like Available and Used margin. So, in the example above, ₹50,000 is your available margin while the used margin is the amount that gets blocked when you place particular order.
On squaring off the position, this used margin is again added to your available margin.
Hope this article helped you know what is margin in Zerodha in great depth. If you have any other stock-market related questions, make sure you ask us by putting those in the comments.
