What is a margin pledge?
Have you ever been in a situation where you have stocks and mutual funds lying in your portfolio, but very limited cash margins, due to which you have lost out on some attractive trading opportunities?
We at IIFL Securities understand our customer's situation and to resolve this situation we have introduced the “margin pledge” feature on your IIFL Markets App.
Margin Pledge is a process in which you can pledge your stocks to the IIFL in return for a collateral margin, which you receive after a percentage deduction called a haircut (Haircut is the amount that covers for the risk a broker is exposed to if the collateral share prices move erratically).
Let us understand this through a simple example.
Suppose, I am an investor who has shares of X, Y and Z companies worth Rs 2,00,000 in his holding. Now a trading opportunity arises but due to lack of funds, I am unable to seize it. So, I decided to pledge my stocks to IIFL .
Then IIFL deducts a % haircut of say 20% from the total value of my stocks (calculated at their current market price), i.e Rs 40,000 and gives me the remaining value of Rs 1,60,000 as a collateral margin which I can now use for trading opportunities on your IIFL Markets App.
The margin received from pledging can be used for intraday trading in Cash Segment, Futures and Options writings.
The collateral received will be calculated on the basis of the lower of Last Traded Price (LTP) or Previous Close of the stock & will be updated in real-time after deduction of the haircut. The price of the margin is not fixed but keeps varying from day to day depending on the closing price of your pledged stocks.
Let’s say a new trading opportunity arises in the market
-> has holdings of X, Y, and Z companies worth up to ₹ 10,000
-> Zero cash to trade
-> Opts to pledge his holdings
-> ₹ 9,000 collateral margin received after a haircut.
-> has holdings of A, B, and C Companies worth up to ₹ 10,000
-> Zero Cash to trade
-> Decided not to pledge holdings
-> Missed out on the great opportunity to trade
This example clearly shows how you can benefit from the margin pledge feature. It is like hitting two birds with one stone. Now let us look at how we can access this feature from the IIFL Markets App.
How to pledge your holdings?
1. Go to your fund's page and click on ” increase margin”
2. Tap on the stocks you want to pledge & Click on ‘Submit a request’
3. You will be redirected to the CDSL portal enter and verify the OTP
4. Margin will be credited to your account within 5 mins