Best options for margin for intraday FNO trading

Intraday FNO Trading Margin

Margin is the amount of money or securities that a trader needs to deposit with a broker to initiate a trade. Intraday FNO (Futures and Options) trading requires traders to maintain a certain amount of margin to cover the risk of losses. Let’s take a look at some of the best options for margin for intraday FNO trading.

Cash Equivalent Margin for FNO Trading

Here are some options for cash equivalent margin:

1. Cash: This is the most common form of cash equivalent margin.
2. Fixed Deposits (FDs): Many banks offer FDs that can be used as collateral for margin.
3. Government Securities (GSec): GSecs are issued by the government and are considered low-risk investments.
4. Treasury Bills (TBills): TBills are short-term debt instruments issued by the government and are considered safe investments.
5. Bank Guarantee: Some banks offer bank guarantees that can be used as collateral.
6. Sovereign Gold Bonds: These are issued by the government and are backed by gold.
7. Few ETFs: Some exchange-traded funds (ETFs) are eligible to be used as collateral.
8. Liquid Funds, Money Market Funds, GSec ETFs: These are mutual funds that invest in short-term debt instruments and can be used as collateral.

Non-Cash Margin

Here are some options for non-cash collateral:

1. Stocks: Eligible equity stocks can be used as non-cash collateral.
2. Eligible ETFs: Some ETFs are eligible to be used as non-cash collateral.
3. Many Open-Ended Mutual Fund Schemes: Some mutual fund schemes are eligible to be used as non-cash collateral.
4. Eligible Bonds: Generally, bonds issued by public sector undertakings (PSUs) or banks are eligible to be used as non-cash collateral.

It’s important to note that not all securities falling under these categories are approved by the exchange. For example, not all liquid funds or bank FDs are accepted as collateral. Each security is individually approved by the exchange.

SEBI (Securities and Exchange Board of India) mandates that cash collateral has to be 50%, but many brokers allocate cash margin to clients. For example, if a client has 2 crores of equity and post-haircut, the eligible margin is 1 crore. If the client gives 50 lakhs cash equivalent margin, they can trade up to 1 crore of margin (50 lakhs cash + 50 lakhs non-cash). If the client does not give any cash margin, they may not be able to trade. However, many brokers allocate their cash to clients and allow them to trade up to 1 crore (not beyond actual cash + non-cash margin given by the client). While some brokers may charge for this cash margin, some brokers may give complementary as they get brokerage from volume.

In conclusion, it’s essential to understand the margin requirements for intraday and positional FNO trading and the various options available for cash equivalent and non-cash collateral margin. Traders should also check with their brokers to understand the approved securities and the allocation of cash margin.

Positional FNO trading refers to holding a position overnight. Traders need to maintain a 50% cash or cash equivalent margin and 50% non-cash collateral margin for positional FNO trading. The difference being, majority of brokers either do not allocate cash for positional trading or even if they do, they would charge interest on cash benefit provided. The interest rate may vary from 3%-6%-10% depending on size of trader and income from the client. It is rare for brokers to provide cash margin facility incase the brokerage income from client Is substantial to cover all costs.