Get margin money by Pledging existing Shares
Are you losing the trade opportunities every day because of limited cash margins while you have shares in your holdings? Do not worry just pledge your shares for collateral margins to enhance your buying power, which you will receive after certain % deduction called a haircut.
What Is Margin Pledging?
Pledging, by definition, refers to the process of using your shares as securities to avail a loan. It functions like any other mortgage loan where you use an asset as a collateral, like gold jewelries in a gold loan. When you use pledging, your risk exposure gets limited to the securities you have used as collateral.
Shares pledged by clients from their demat a/c with Angel Broking are treated as the Collateral. These are shares locked and you cannot sell them you until you unlock them. The process of unlocking the pledged share is called as unpledging of shares.
What can be pledged?
You can pledge your stocks, ETF (Exchange Treaded Funds), SGB (Sovereign Gold Bonds) and active mutual Funds. Please note that passive mutual funds are not allowed to be pledged.
Limits are given after deducting the haircut. for e.g., a haircut of 25% would mean, 75 % of stock value will be given as margins money. The margin received from pledging can be used for trading Equity Intraday, futures & options.
Let’s try to explain this through an example.
Harish, a customer of Angel Broking holds shares of three companies in his demat account:
• Sun Pharmaceuticals Ind. Ltd - 125 shares
• Suzlon Energy Ltd - 750 shares
• Reliance Capital Ltd - 95 shares
class="has-text-align-justify">He wishes to pledge 100 shares of Sun Pharma which is trading at Rs.812.50 to take on a Futures position in NIFTY Futures. The value of his pledged request is:
(100*812.50) = Rs. 81,250
Once we receive his request it will be processed in the following manner.
Angel Broking will deduct 25% as haircut from the pledged value (25% of Rs. 81,250 = Rs.20,312.5). Therefore, the balance becomes Rs.60,938 (81,250.5 - 20312.5). This balance will become available to Harish as collateral margin.
Advantages of Pledging
- The pledging facility will provide the option of reusing the part of capital lying in your portfolio with adding any without adding funds.
- Avoid losing the trade opportunities because with 5 minutes the margins are updated.
- You will continue to get benefits of all corporate actions like dividends, splits, bonuses, etc. on the stocks you have pledged.
Cost of Pledging
The entire process of pledging and unpledging will cost Rs 40+GST per scrip irrespective of the quantity. For example, if you pledge 100 shares of TCS and 1000 shares of Infosys the total cost (pledging + unpledging) will be Rs 80 + GST (Rs 40 x 2). This charge will be debited from your ledger the day you place the pledge request.
How to pledge shares using Angel Broking?
- Log in to Angel Broking Mobile App and click "Funds" from the bottom of the page then click Pledge Holdings.
- Click Increase Margin and select the stocks/qty for Pledging.
- Now click Create Margin to initiate the Approval Process.
- Look for an email/SMS from CDSL with OTP to approve the request.
You are done, use the margin money trading Equity Intraday, futures & options. Happy Investing.