If you are someone who wants to buy stocks from the stock market more than you actually can, with your trading amount – then you may use margins in your trades.
In simple words, it’s sort of a loan provided to you by your stockbroker based on the trading segment and the specific stock.
When you sign the POA (Power of Attorney), there is a specific section that talks about margin trading. The stockbroker takes the rights to sell off shares from your demat account in case you are not able to return the requisite amount.
Furthermore, this loan you take from the broker comes at a specific interest rate that can be in the range of 14% to 23% depending on the stockbroker and the margin used.
In this review, we will specifically talk about 5Paisa Margin values across different stocks it offers to its clients for trading.
In order to make the numbers easier to understand, we have done clear segregation of margin provided based at share level, lot level and overall margin provided across scrips to the clients of this discount broker.
5Paisa Margin Funding
In order to avail 5Paisa Margin funding, there are a few sets of conditions that you need to take care of.
For example, if you are considering using margin in F&O stocks, then the applicable margin will be VaR + 3 times extreme loss margin,
Similarly, for margin not for F&O stocks, then the applicable margin is VaR + 5 times extreme loss margin.
Some of the other conditions include:
The client must maintain the maintenance margin at all times while placing trades.
The broker (5Paisa in this case) may choose to increase or decrease the initial and/or maintenance margin requirements at any given point in time.
Traders must respect the margin call provided by 5Paisa and take care of any deficiency of margin money in their account as soon as possible.
All the communications regarding margin funding will be made on the client’s registered contact details by 5Paisa. It is the client’s responsibility to consider these communications as and when provided.
5Paisa, without any notice, may liquidate the client’s collaterals and/or securities held in case the client fails to pay outstanding amount post being notified.
5Paisa Margin Plans
Recently, 5Paisa has introduced subscriptions plans charged on a monthly basis and users can get better services depending on the subscribed plan.
As far as differences in margin values are concerned, here are the details:
₹249 Per Month
₹499 Per Month
₹45 Per Traded Month
₹30 Per Traded Month
Margin - Intraday F&O
Upto 3.5 Times
Margin - Option Writing
5 Times on normal & 10 Times on expiry
Square Off Time
5Paisa Span Margin
SPAN or Standardized Portfolio Analysis of Risk is a process used by different stock brokers in India in order to calculate the amount an investor/trader must be kept in his/her trading account while using the concept of exposure to incurring any potential loss in the stock market.
The interesting part is, that there is no single value of SPAN margin and it varies from one scrip to another.
The logic behind that is that every stock has its own level of risk associated with it, based on the industry, stock volatility, competition and any global events for that matter.
5Paisa Exposure Margin
Exposure margin is an additional level of margin that is used above span margin. Also, note that both Span margin and exposure margin constitute the initial margin and just one of these do not mean the total margin.
Now, lets quickly jump to see what values of margin you get from 5Paisa at Span and Exposure levels.
The discount broker allows you to place bracket order as well.
However, in this case, the margin values offered are reasonable and go as high as 20 times for specific stocks. These margin values will be displayed to you within the 5Paisa trading apps.
5Paisa Margin Interest
Whenever you use margin funding, there is a specific interest percentage levied by the stockbroker.
In the case of 5Paisa, you need to pay an interest of 18% per annum. However, you need to remember that the interest amount is to be paid on a monthly basis to the broker.
Overall, this interest percentage goes inline with industry standards. Having said that, make sure you use margin funding in such a way that you don’t end up paying cumulative interest, which actually eats up your profits.
5Paisa Margin Charges
There are no separate charges that you need to take care of apart from the margin interest (discussed above).
However, there could be some penalties or fines levied in case you are not able to pay or maintain the balances due at different points in time.
Having said that, make sure to keep your margin money in check especially after getting a margin call from the broker. Not doing that, attracts unwanted charges levied on your account.
5Paisa Vs Zerodha Margin
When it comes to comparing these two stockbrokers, both have their own set of pros and cons. In fact, you can check out this detailed review on Zerodha Vs 5Paisa here.
As far as margin comparison is concerned, 5Paisa scores marginally better than its other discount broking counterpart.
Zerodha plays really subtle as far as margin trading is concerned and does not offer a lot of margin across trading segments. In fact, most of the other stockbrokers in this league fair better than Zerodha in this trading aspect.