Have you ever missed a good trading opportunity just because you were low on funds at that moment? What if you could leverage 4x of your buying power and seal that trading opportunity in your favour? Yes, it is possible with Margin Trading Facility(MTF). Let us find out what Margin Trading Facility is and how it works in favour of an investor.
What is Margin Trading Facility (MTF)?
Margin Trading Facility allows investors to buy a stock by paying just a fraction of the total transaction value. The balance amount is funded by the broker (such as Angel One). You can increase your buying power up to 4x via MTF.
Your Account Balance = ₹ 25,000
MTF gives you up to 4x buying power = ₹ 1,00,000 (25,000 x 4)
Thus, your enhanced Buying Capacity is now = ₹ 1,25,000
Meaning, you can still trade up to ₹ 1,25,000 even when you only have ₹ 25,000 in your account. How awesome is that?
However, you need to ensure that you have the required margin in your account before getting MTF.
So, what is the margin required?
Margin required is the amount you need to pay initially to buy stocks under margin products. Margin amount can be paid either in the form of Cash and/or Non-Cash Collateral.
You can hold your positions under MTF as long as you maintain the required margin in your account.
Isn’t it simple? So, what’s stopping you from availing MTF with Angel One?
How does the MTF work?
With MTF, you can increase your buying power up to 4x. For example, if you have Rs 100,000 in your account, you can receive up to Rs 400,000 under MTF to increase your buying power to Rs 500,000.
What is the interest charged on MTF?
An interest of 0.049% per day (18% per annum) is levied until repayment of the borrowed amount or the trader squares off the position.
What are the differences between Margin Pledge and MTF Pledge?
Margin Pledge: Margin Pledge means using your existing holdings/portfolio to get an additional limit/margin. You can then use this extra margin to buy more shares.
MTF Pledge: As per SEBI guidelines, shares bought under MTF have to be compulsorily pledged. It is called the MTF pledge. Unlike Margin Pledge, you do not get extra leverage against these shares.
When would my shares purchased under MTF be squared off?
For shares purchased under MTF, square off will be triggered in either of the below scenarios:
– You need to pledge the shares purchased under MTF before 9 pm on the day of purchase. Failing to do so will automatically square off your position on T+7 days.
– In case of margin shortfall, automatic squaring off will trigger in 4 trading days after the shortfall.
What is the deadline to complete theMTF Pledge Process?
You need to pledge your respective shares by 9 pm on the same day. Or else, the shares will be squared off on T+7 day.