Different types of Margin Trading – Detailed Guide


In the case of margin trading, there are a number of questions that arises on a daily basis and not having ample knowledge about a different kind of margin trading might be a problematic thing. Today we are going to talk about different kinds of margin trading in a detailed manner so that you can help details knowledge about the subject and understand the current market Trends about margin trading.

What Are the Different Kinds of Margin Trading?

The main different kinds of margin trading are gross exposure margin, initial daily margin, special margin, Ad Hoc margin, mark to market margin and the volatility margin.

Gross Exposure Margin

In case of this margin trading, the payment offers daily, and the blockers are asked to make Collateral or any kind of security available which can be in the form of bank guarantee or stocks or even cash. This is done in order to make sure that in case of any kind of default of payment the Collateral can be used in order to make things even. This is normally paid even before the transactions take place.

What Is Meant by Initial Margin?

Daily or the initial margin is collected from the investors in order to buy or sell shares from the clients. The initial margin is collected by the broker in order to you have a safety against any kind of unfortunate event that might take place during the trading days. Both the buyer and the seller will have to deposit the initial on the starting margin before the future is transaction takes place. The amount of initial margin that will be connected will depend on the price of the stocks over a specific historical period of time. It may be one year or 6 months.

What Is Meant by Special Margin?

Special margins are only implemented on the kind of stocks which shows abnormal behavior on the basis of the price of the volume.  special surveillance is implemented on it so that movement can be checked in a particular time span. At BSE, the margin percentage can be at a range from 25 % to 50%. What the kind of special margin that will be implemented will definitely depend on the kind of movement that the stocks of shares are showing and it may vary on the buying or selling position of both the parties.

What is Mark to market margin?

When and there is a fall in the market price, and it goes even below the transaction price then there is a call for the mark to market margin  which shows the amount of difference that is to be paid by the seller or buyer. The same can happen if the price is above the transaction price. In order to understand the margin calculation for this segment, you have to find out the difference between a particular day closure and the previous day closure.

What is the volatility margin?

If there is any case of abnormal Intraday fluctuation in any of the scrips, then the volatility margin is used to check the same.  The primary purpose of the volatility margin is to make sure that both the buyer and the seller are actually sticking to their commitments even if there is a high rise or high low in the case of the share prices.

What is the ad hoc margin?

The ad hoc margin is the kind of payout that is implemented on the brokers over the liquid stocks which are very low in price.

Now that you have a fair idea about the various kinds of margin, you will be able to understand the implementations of the same. According to delta.exchange, it is the best option to have an idea of the different kinds of tradings so that you know what you are paying for.

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