What is the difference between ‘Margin’ and ‘Cash’ Accounts?
SECP regulations allow brokers to revise their margin requirements for their account holders if they inform their customers at least 3 days prior to the implementation of the revised margin requirements. The use of margin accounts provides investors to buy and hold more stock without paying for it in whole. This can provide investors the advantage to generate higher profits, but it also exposes them to the potential of higher loss. Cash accounts are different from margin accounts in the way that the amount deposited by the account holder is fully used and the funds deposited stipulate the amount of trading activity that can be conducted in that account. This means that the Account Holder can only buy/sell shares equal to the funds deposited by him/her with the broker.
What is your margin requirement?
You must keep at-least 30% margin against your outstanding exposure for the purpose of trading in your account. Yes, KTrade Securities Limited (formerly known as Khadim Ali Shah Bukhari Securities Limited) reserves the right to refuse any account without assigning any reason.
How do I get to know my current margin maintenance?
Your current maintenance margin is shown in the Margin Report in the Available Margin column. Margin Report can be accessed from the Account Status menu of KASB software.
What is Equity?
Equity is the ownership of shares in a corporation in the form of common stock or preferred stock. It also refers to total assets minus total liabilities, in which case it is also referred to as shareholder’s equity or net worth or book value.
What is the difference between Delivery Versus Payment (DVP) and Margin Trading?
Delivery Versus Payment refers to where stocks are purchased and marked for delivery with the total value of the trade deducted from the Customer’s account thus reducing the corresponding cash balance in his/her account. In this manner, he/she can only purchase and sell stocks that are less than or equal to the amount of cash deposited by him. Margin trading is used to provide clients with additional funds as a multiple of their cash deposited. If a client places the basic account opening requirement of Rs.100,000, he/she is provided a trading limit that is 100/30 or approx 3.33 times the amount i.e. Rs.333,000. The margin amount is calculated as 30% of the trading limit.
What is a Margin Call?
Margin call can be simply explained as a message sent to the client when his/her margin deposit falls below 30% of his exposure. Margin calls are sent to client via email.
How can I calculate my ‘Return on Investment’ (ROI?)
Return on investment is calculated by taking the value of the investment held at the beginning of the ROI period compared to the current value. In other words: ((Current Value) – (Beginning Value) + (Income)) ________________________________________________, where (Beginning Value) (Current Value) = (the current total shares) x (the last price), (Beginning Value) = [(Number of shares held prior to the period – any shares sold) x (the closing price prior to the period)] + the “Cost Basis” of any shares added in this period (Buys, Reinvest, Add Shares, etc), and (Income) = any income events such as Dividends/Interest (not Reinvested) and Realized gain/loss from Sells in this period. For example, assume that on 1/1/99 you owned 1000 shares of XXYY (which had been purchased prior to this date), the last price (on 12/31/98) was Rs.69 11/32, and you still own the 1000 shares and the current price is Rs.90 1/8. The ROI (YTD) for XXXX Script would be calculated: [(1000 x 90.125) – (1000 x 69.34375)] / (1000 x 69.34375) = 20781.25/69343.75 = 29.968% If you had purchased 200 additional shares at Rs.75 each during this period, the formula would be modified as follows: [(1200 x 90.125) – (1000 x 69.34375 + 200 x 75)] / (1000 x 69.34375 + >200 x 75) = 23806.25/84343.75 = 28.225%