OPEN MARGIN ACCOUNT

OPEN MARGIN ACCOUNT

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Margin account

When you open a trading account with a brokerage firm to buy and sell shares, you have two options – a margin account and a cash account. A cash account is relatively simple: you pay for whatever you have bought, and the broker gets a commission from your transactions. A margin trading account is different in that you don’t pay cash upfront for any shares that you buy. Instead, you only deposit a percentage of the transaction; the rest is a loan from the broker.

How to open margin account

STEP 1

The first step is to fill the Account Opening Form. This can be done at PR Wealth Growers offices or click the below button to open an online account.

STEP 2

Submit proof of address and residence like PAN card, Aadhaar card, passport or voter card.

STEP 3

A company will do the online verification either in person or on the phone.

STEP 4

You will also have to sign a 'Rights and Obligations' document.

STEP 5

After that, you will be given a login ID and password. You will now be able to access your account to do margin trading.

Differences between margin trading in shares and futures trading

SharesFutures
You Have Ownership Of Shares While Margin Trading, So Get The Benefit Of Dividends,No Ownership Of Shares. You Make Profits From Changes In Prices
Margins Are Higher, At Around 20-25 PercentMargins Are Lower In The Case Of Futures Trading, 10-15 Percent
There Is No Mark-To-Margin While Determining Margin Calls In Case Of Unfavourable Price MovementsMargin Calls Depend On Mark-To-Market (MTM) – Futures Are Valued Daily At Market Prices, And Margin Calls Will Rely On MTM Value
You Have To Pay Interest On The Amount Funded By The BrokerThere Is No Interest Payable In The Case Of Futures Trading
Positions Can Be Carried Forward For An Unlimited PeriodPositions Can Be Carried Forward For A Maximum Of Three Months
You Can Use Margin Trading In Any Stock You Want, Subject To A Few RestrictionsFutures Trading Is Available Only On Certain Stocks Specified By The Stock Exchange
There Is No Minimum Lot SizeThe Minimum Lot Size Is Rs 5 Lakh.

Margin trading in commodities

Margin accounts are also available for trading in commodity futures and options in commodity exchanges like the Multi-Commodity Exchange (MCX). Margins are generally much lower in commodity trading – they could be as low as 3-5 percent.

This means that traders can take significant positions in commodity futures and options through leverage. As we have pointed about leverage offers considerable scope for profits, but also leaves you open to huge losses. This is particularly true of commodities, whose prices tend to be very volatile compared to stocks.

Types of margins

Margins are calculated in different ways on the cash market segment of stock exchanges. These methods include Value at Risk (VaR), Extreme Loss and Mark to Market margins.

  • VaR margin: This is the most common method used. Here, we estimate the probability of loss based on historical price trends and volatility of the stock. It covers the most considerable percentage loss that can be incurred by an investor for shares on a single day with a 99 percent confidence level.
  • Extreme Loss margin: This is a margin that covers expected losses in situations that lie outside the coverage of the VaR margin.
  • Mark-to-Market margin: MTM is calculated on all open positions at the end of the trading day by comparing the transaction price with the closing price of the share for the day.

Open Free Margin Account and Start Trading in 5* Minutes

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