50-50 Rule and utilization of cash/non cash component and free cash

@PravinJ
Good morning!

  1. Are there any updates on the utilization of collateral margin first and free cash later?
  2. Do I need to maintain free cash in order to carry forward option buying?

Let’s say.

I’ve got 95 L cash collateral margin (The margin I get from pledging cash components such as Government securities or any other as prescribed by Dhan)
Also Am left with no free cash in my account.
And now i take a strategy home that requires 75L worth sell legs 20L worth Buy legs as hedges.
Do I need to have free cash for buy legs or it’ll be utilized from the margin i received from the pledging of cash component?

Please enlighten!

Hey @Bhaskarsingh ,

Free cash is utilised first and collateral margin later. In the example shared by you-
Cash component margin will be fully utilised for the strategy and there will be no margin shortfall. However, if there is any ledger debit post taking the trade, interest will be applicable.

Thanks,
Pranita
Product @ Dhan

@Pranita

If Dhan is utilizing free cash first and collateral margin later then this is a serious issue and not favorable for us. I guess Dhan knows the reason.

And am surprised that how buying is being allowed from the collateral margin. Though its favorable for users that no free cash is required and margin will be utilized from cash equivalents.
How will you recover the losses if the contract expires worthless?

Liquidating the colletral?

Please explain!

Thank you!

1 Like

@Bhaskarsingh It is our RMS policy to utilise free cash first.

Buying is allowed either ways, whether margin is in the form of cash or non cash component. However, incase of cash component 50-50 margins need not be maintained and you will not be charged interest. This is uniform across all brokers.

Thanks,
Pranita

Thanks for your reply!

RMS policy for free cash first is a pain. Please refer to this as why it is: Refund of credit Balance from F&O trading

I have been waiting for this to edit as promised by @PravinJ

Nonetheless, Dhan is doing a fantastic job, and am very proud of the whole Dhan team.
I know running a business amid such heavyweight competition and catering to clients with such a diversified mindset is a very tough job.

Trust me you guys are doing good. Take a moment to appreciate yourself.

Am just ensuring that I land into a good team.
Hopefully, I’ll.

Thanks!

2 Likes

@Pranita @PravinJ Assume I got a margin of 5L pledging by stocks, ETFs (which may not be eligible as cash component). Still I can sell options even without having either 50% cash/cash-equivalent collateral. Correct me if I got the wrong impression. If yes, can those positions be also carried forward ?

Hi @kbkalyani56

You can place the order and even carry it forward. The system will not stop placing orders. However, if there is a margin shortfall, interest will be charged.

Additionally, if you incur any losses and your ledger remains in debit beyond T+4 days, then our RMS team will square off your holdings on T+5 days.

Read more on this:- https://community.dhan.co/t/important-update-reversal-of-penalty-on-shortfall-of-upfront-margin/4310?u=divyesh

@Divyesh How much interest is charged for intraday trades?

Hi @kbkalyani56 we have explained the scenario here -

https://community.dhan.co/t/important-update-on-margins-usage-of-broker-funds-and-interest-charges/2857