MTM stands for “Mark To Market” and is a method by which the fair value of fluctuating assets and liabilities can be measured. In terms of trading and investments, securities such as “futures” and “mutual funds” are marked to market to show their current market values.
MTM in Upstox compares the real market value of a security with its book value.
MTM is calculated on a daily basis and is either debited or credited to/from your margin account. In simple words, MTM Margin help in knowing if you have a sufficient margin or need to bring in more margins.
It is calculated in terms of positive and negative. A rise in the price of security means positive MTM while a fall in price indicates a negative MTM. Discussed below is all you need to know about Upstox MTM.
MTM In Upstox
As already mentioned, using the MTM in Upstox, you can measure the real market value of a security, i.e. real value vs the book value. The difference between the two is the MTM margin.
Even though the Upstox MTM measures your trading risks on a daily basis, the actual margin call is only made when the account balance goes below the SPAN (Standard Portfolio Analysis Of Risk) level.
Upstox MTM On The Cash Position
Let’s assume that the available cash margin is 20,000 and we are dealing with an F&O stock. Since Upstox provides a 5x margin on F&O, the total exposure is 5×20,000 i.e. 100,000 for intraday.
Now, if a trader buys 100 shares of XYZ at ₹1000, and later sells all these 100 shares at ₹900
He is incurring a loss of ₹10,000 (100 shares x ₹100).
If we compare this loss to his actual Upstox capital i.e. 20,000, his MTM has breached 50% (20,000 – 10,000).
In such a scenario, the client will receive a warning from Upstox. Also, Upstox’s MTM loss will keep issuing warnings to the client for every 10% addition in the percentage.
When the percentage reaches 80%, the client will either be asked to deposit more funds or Upstox shall start auto squaring off his open positions.
Upstox MTM Square Off Percentage
As already mentioned, Upstox square off positions when the MTM breach percentage reaches 80%.
Here, it is important to note that Upstox’s Risk Management team (RMS) determines the square off percentage for MTM losses.
In case the MTM percentage/level breaches anywhere between 50% to 80% of the available cash margin, the Risk Management Team can square off the client’s entire position. They may or may not intimate the clients on the same.
However, for the “Priority Pack” clients, the treatment is a little different. The cut off for such clients is at 70%. Besides, this cut off is applicable to the “Securities” as well as the “Commodities” separately.
Wondering if there are any MTM (Mark to Market) benefits on the MTF (Margin Trading Facility) shares? Unfortunately, there’s no such provision on Upstox.
Any leverage/margin is not given on the appreciation value of shares (that are held under the Margin Trading Facility).
However, clients need to deposit an additional margin if and when they incur an MTM loss on shares bought under Margin Trading Facility (MTF).