The first step of Do-It-Yourself !
How can I pledge my holdings under the new pledge system?
ln light of the recent regulatory changes, your holdings cannot be transferred to your stockbroker for pledging.
You will need to authorize a pledge request in favor of your stockbroker who will then repledge it with the clearing corporations for allowing you margin benefit. The shares will continue to stay in your Demat account but will be marked pledged.
You can follow the below steps to pledge your holdings under the new system.
Raise the pledge request on Bot
Visit the link you have received on your registered email ID or mobile number.
Once you’ve clicked on the link, you will be redirected to CDSL’s webpage where you are required to enter your PAN number and generate an OTP that you will have to key in to authorize the pledge
Authorize the pledge
Pledged option available from 8.00am to 6.30pm, collateral margin will be available on T+1 day.
Interest of 0.05% per day on any debit balance.
Cost of pledge: ₹15 + GST per scrip buy and sell ₹15 = GST irrespective of qty. of stocks pledged.
This pledge is being created in the name of Alice Blue Financial Services (P) LTD – DP ID: 1208530000987132.
Important: You will receive an email from CDSL to authorize the pledge request. Please ensure to authorize the pledge before 11.00 PM to receive the margins from the T+1 day.
Note: NON POA clients are not applicable to pledge
Why do we Invest in Stock Market?
- Basically earning and saving is insufficient in today’s world. We have to ensure enough funds to arrange for future development. Expansion of your business in today’s ever-growing costly world will eat into the estimation of your money. To compensate loss through inflation, we contribute to the stock market to gain an extra amount. The share trading system is one such venture, fundamental but easy to earn extra money to Trading FAQs of Demat Account.
- Earlier in the 1800s, stockbrokers did the direct exchange of stocks under the Banyan trees. As the number of brokers increased, they just had no real option than to migrate from one place to another. At last in 1854, they moved to Dalal Street, which was the oldest stock trade in Asia. Currently, it’s known as the Bombay Stock Exchange (BSE). Also, this is India’s first stock exchange and since it has played a vital part in the Indian stock market.
- In the year 1993, the National Stock Exchange or NSE was established. Within a couple of years, exchanging on both the trades moved from an open outcry system to a computerized trading environment. Once you begin, you will understand that the fundamentals of investment are not very complicated.
What is Share Market?
- A Share Market which is quite similar to a Stock Market. The key contrast is that a stock market offers you some assistance with financial purposes like securities, bonds, mutual funds, etc. A Share market just permits exchanging/trading of shares. A Share Market is a place where the shares are either issued or exchanged.
- The Stock Exchange is a facility where stockbrokers and traders can buy and sell securities. For exapmple bonds, shares and other financial instruments. You can buy or sell the stock only when it is listed on an Exchange. India’s top Stock Exchanges are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). That is the place where the stock buyers and sellers can meet.
- THERE ARE TWO KINDS OF SHARE MARKETS – PRIMARY AND SECONDARY MARKETS.
- Primary Market: Here the company gets registered to issue the share and raise money for each share. This is also called getting listed on a Stock Exchange. A Firm enters the primary market to raise the capital amount. If the company is selling the shares for the first time, it is called an Initial Public Offering (IPO).
- Secondary Market: Once new securities have been sold in the primary market, these shares are traded in the secondary market. This is a chance for investors to exit his/her investment and he/she can sell the shares for their profit. Secondary market transactions are referred to trades where one investor(buyer) purchases shares from another investor (seller) at the overall market price or at whatever the price, two gatherings concur upon. Formally, investors direct such transactions by utilizing a broker who does the transactions for them.
How to Buy Shares in Share Market?
- Initially, you have to open a Trading Account and a Demat account. These accounts will be connected to your bank account for the smooth exchange of cash as well as shares.
- Bonds: Companies need money to buy or to work on some projects. They will pay back you by the money earned through their projects. They are using bonds to raising the funds. When a company borrows the amount from the bank, it is a loan. When a company raises money from investors in return for convenient installments of interest, it is known as a bond. Thus, a bond is a method for lending money from others (investment). These are some features of bonds.Principal/Face amount: A bond has a principal or face amount on which the issuer has to pay the interest by the end of the term Maturity: On Maturity date, the issuer has to repay the nominal amount
- Secondary Market: In return for the cash, companies issue shares. Owning a share is quite similar to holding a part of the company. It simply means that you’re also one of the investors in the company. These shares are then traded in the share market. If the project gets completed, you will get a part of share from the profit. Shares are in this manner, a declaration of responsibility for company. In this way, as a stockholder, your share benefits the company. As the company continues improving, your stocks will increment in quality.
- Mutual Funds: In simplest terms, a mutual fund is a common pool of money in which investors give their contribution.This permits you to invest in an indirect way into stocks or bonds. Each mutual fund plan issues units, which have a certain value i.e. NAV(Net Asset Value). When you contribute, you consequently turn into a unit-holder. Whenever prices of stocks / bonds increses simultaneously NAV prices also increses. Investor will redeem his units to book this profits.
- Derivatives: The value of shares is unpredictable. It is difficult to fix a particular price. The derivatives instruments help you trade at today’s price for the future purpose. Simply mention in an agreement to either buy or sell a share or other instrument at a certain price which was fixed earlier.
What does the SEBI (Securities and Exchange Board of India) do?
Its basic objectives are:
- Protecting the interests of investors in stocks
- Improvement the stock market by advertising
- stock market regulating
How are derivative contracts linked to stock prices?
What are the pre-requisites to invest?
There are three pre-requisites to investing:
- Demat account: It is the unique account for every investor and trader. This account stores your securities in electronic configuration methods. Thus, no one can access your account without your permission.
- Trading account:Here we conduct trades through this account. The account number can be viewed as your identity in the trading sectors. It is connected to the demat account, and in this manner guarantees that your shares go to your demat account.
- Margin maintenance:This refers to the amount the investor must maintain in his margin account. While large number of money uses margins to conduct traders, this is transcendently used in derivatives segment. Margins are act as a risk containment measure for the exchanges and serve to preserve the integrity of the market. You are required to deposit initial margin at very beginning. The amount you need to deposit is chosen by the stock exchange. This initial margin is balanced daily by relying available market value of your open positions.
- The exposure margin is used to control unpredictability in the derived markets.
- Besides the initial and exposure margin, you are additionally needed to maintain the Mark-to-Market (MTM) margin. This covers the daily differences between the price of the contract and its closing price on the day of purchase. In this way, the MTM margin differs day by day.
What are Futures Contracts?
What are Index Futures?
A stock list is used to view the changes happened in the price of group stocks over a certain timeframe. It is developed by selecting the stocks of similar companies. Some files represent a certain segment or the general market thus helps the value of the company. Future contracts are likewise accessible on these lists. Here are a few elements of index futures:
- Contract size: Similar to stock future, these contracts are additionally managed in lots of parts. In any case, how could that be the point at which an index is basically a non-physical number? No, you don’t need to buy futures of the stocks fitting in with the index. Rather, stock indices points in the estimation of the index are changed over into rupees.
- Expiry: A open position in index futures can be settled by directing an opposing exchange prior to the day of expiry.
- Duration: As on account of stock futures, index futures to have three contract arrangement open for trading at any time – the near month (1 month), middle month (2 months) and far-month (3 months) index futures contracts.
What are Futures Contracts Pricing?
Futures are derivative products whose quality depends to a great extent on the price of the fundamental stocks or indices. On the other hand, pricing is not direct. There remains a difference between the price of the fundamental models in the trade and the derivative segment. This distinction can be comprehended through two simple pricing models for futures contracts. These will permit you to assess how the pricing of a stock future or index futures contract may carry on. These are:
- The Cost of Carry Model
- The Expectancy Model
What is Basis?
What are Options?
It is a kind of security that can be bought or sell at a predefined price within a predetermined time, in exchange for a non-refundable forthright deposit. An options contract offers the buyer the privilege to buy, not the commitment to buy at the predetermined price. Options are a kind of derivative product. The right to sell a security is known as a ‘Put Option’, and the right to buy is known as the ‘Call Option’. The usage of the options is as follows:
- Leverage: Options offer you profiting from some changes in offer prices without putting down the maximum of the share.
- Hedging: Similarly they can be used to protect yourself from changes in the price of a share and giving you a chance to buy or sell the shares at a pre-decided price. Generally, as future contracts reduces the risks for buyers by setting a pre-decided future price for an underlying asset, options contracts do the same and then, without the commitment to buy that exists in a future contract. The seller of an option contract is known as the ‘options writer’. There is no physical exchange of reports or documents in options contract.
IMPORTANT TERMS IN OPTIONS CONTRACTS:
STRIKE PRICE: It is also known as “exercise price”. The price at which a particular derivative contract can be exercised. The strike price is used to portray stock and index options, in which strike prices are settled in the contract. For call options, the strike price is the place where the security can be purchased, while for put options the strike price is the price at which shares can be sold.
STRIKE PRICE INTERVALS: These are diverse in strike prices at which an options contract can be exchanged. These are controlled by the exchange on which the assets are traded. There are regularly no less than 11 strike prices declare for each kind of option in a given month – 5 prices over the spot price, 5 prices beneath the spot price and one price proportional to the spot price.
For options contracts the following strike parameters are applicable on all individual securities in NSE
The Strike price would be:
Underlying Closing Price Strike Price Interval Number of Strikes Provided In the price- On the price- Out of the price Number of additional strikes which may be enabled in the day in either direction Less than or equal to Rs.50 2.5 5-1-5 5
> Rs.50 to = Rs.100 5 5-1-5 5
> Rs.100 to = Rs.250 10 5-1-5 5
> Rs.250 to = Rs.500 20 5-1-5 5
> Rs.500 to = Rs.1000 20 10-1-10 10
> Rs.1000 50 10-1-10 10
STRIKE PRICE INTERVALS FOR NIFTY INDEX*
The quantity of contracts provided in options on an index depends on the range in earlier day’s end closing value of the underlying index and applicable according to the accompanying table:
Index Level Strike Interval Scheme of Strike to be introduced
up to 2000 50 4-1-4
>2001 up to 4000 100 6-1-6
>4001 up to 6000 100 6-1-6
>6000 100 7-1-7
EXPIRATION DATE: A future date is on or before which the options contract can be expired. Options contracts have three different durations as we mentioned earlier:
- Near-month (1 month)
- Middle-Month (2 months)
- Far-Month (3 months)
*Please note that long terms options are available for Nifty index. Futures & Options contracts typically expire on the last Thursday; if it is holiday then it will take the previous business day as the working day.
AMERICAN AND EUROPEAN OPTIONS:
The expressions in terms of “American” and “European” refer to the sort of underlying asset in an options contract and when it can be executed/expires. ‘American options’ are Options that can be executed whenever at the time before their close date. ‘European options’ are Options that must be executed on the expiration date.
Indian market follows only the European market.
LOT SIZE: Lot size is a fixed number of units of the underlying asset that frame a portion of a single F& O contract. The standard lot size is distinctive for every stock and is chosen by the exchange on which the stock is traded. E.g. Reliance Industries options contracts have a great lot size of 250 shares for each contract.
OPEN INTEREST: Open Interest refers to the aggregate number of extraordinary positions on a specific options contract over all members in the market at any given purpose of time. Open Interest becomes the nil past of the expired date for a specific contract. For example: In the event that trader A buys 100 Nifty options from trader B where both of them A and B are entering the in the market surprisingly for the very first time, the open interest would be 100 futures or two contracts. The following day, Trader A offers his/her contract to Trader C. This does not change the open interest, as a decrease in A’s open position is balanced by an increment in C’s open position for this specific asset. Now, if A buys 100 more Nifty Futures from another trader D, the open interest for the Nifty Futures contract would get to be 200 futures or 4 contracts.
TYPES OF OPTION: As we discussed earlier, options are two types of call option and put option.
CALL OPTION: A call option, basically named a “call”, is a financial contract between two gatherings, the buyer and the seller of this sort of option. The buyer of the call option has the privilege, however not the commitment, to buy a number of a specific product or financial related instrument (the underlying) from the seller of the option at a certain time say, the close date at a certain price (the strike price). The seller is committed to selling the product (commodity) or financial related instrument to the buyer if the buyer wants to buy. The buyer pays money (premium) for this right.
PUT OPTION: The Put Option gives the holder the privilege to sell a specific asset at the strike cost at whatever time before it expires for a premium paid in advance. Since you can sell a stock at any given purpose of time, if the spot price of a stock falls amid the contract period, the holder must be protected from this fall in price. This clarifies why put options turn out to be more important when the price of the basic stock falls. Also, if the price of the stock rises amid the contract period, the seller just loses the premium pay and does not endure lost the whole price of the asset. Put options are curtailed as “P” in market criteria.
EXAMPLES FOR THE OPTIONS CONTRACTS: There is a contract in which, Rajesh has the right to buy one lot of 100 Infosys shares at Rs 3000 for each share at whatever time in the middle of now and the month of May. He paid a premium of Rs 250 for every share. He, therefore, pays an aggregate amount of Rs 25,000 to appreciate this privilege to share. Assume the share price of Infosys ascends over Rs 3,000 to Rs 3200, Rajesh can consider practicing the option and buying at Rs 3,000 for every share. He would be sparing Rs 200 for each share; this can be viewed as a tentative profit. Notwithstanding, despite everything he makes a notional net loss of Rs 50 for every share once you mull over the premium sum. Consequently, Rajesh may decide to really exercise the option once the share value crosses over more than Rs 3,250. Else, he can decide to let the option expire without being worked out. Rajesh trusts that the shares of Company X are presently overrated and wagers on them falling in the following couple of months. Since he needs to secure his position, he takes a put option on the shares of Company X. STOCK X Month Price Premium
February (Current month) Rs 1040 Spot NA
May Rs 1050 Put Rs 10
May Rs 1070 Put Rs 30 Rajesh buys 1000 shares of Company X Put at a strike price of 1070 and pays Rs 30 for each share as premium. His aggregate premium paid is Rs 30,000. In the event that the spot price for Company X falls underneath the ‘Put option’ Rajesh brought Rs 1020; Rajesh can protect his cost by deciding to share the put option. He will make Rs 50 for each share (Rs 1070 short Rs 1020) on the exchange, making a net profit of Rs 20,000.
Then again, if the spot price for Company X rises higher than the Put Option, say Rs 1080; he would be at a loss on the off chance that he chose to exercise the put option at Rs 1070. In this way, he will pick, for this situation, to not exercise the put option. Simultaneously, he just loses Rs 30,000 – the premium amount; this is much lower than if he had exercised his option.
How are Options Contracts Priced?
- options can be purchased for an underlying asset at a small amount of the price of the asset in the spot market by paying a forthright premium. The amount paid as a premium to the seller is the cost of entering an options contract. We need to know some fundamental terms like In-The-Money, Out-Of-The-Money, and At-The-Money. We should examine you may be confronted with any of these situations while trading options:
- You will get profit by practicing the option.
- Out-of-the-money: You will make no money (no profit) by practicing the option.
- A no-profit, no-loss situation in the event that you decide to practice the option. A Call Option is ‘In-the-money’ when the spot price of the advantage is higher than the strike price. A Put Option is ‘In-the-money’ when the spot price of the advantage is lower than the strike price.
How the Premium Pricing is Arrived?
The price of an Option in the Premium is controlled by two variables they are intrinsic value and the time value of the option.
- VALUE – It is the distinction between the strike price of an option and cash market spot price. It can either be positive (on the off chance that you are in-the-money) or zero (in the event that you are either at-the-money or out-of-the-money). A profit can’t have negative Intrinsic Value.
- TIME VALUE – The time value is the time left between the present date and the expiration date of Contract. For example Contract A is longer than that of Contract B. So, Contract A has higher Time Value. The contract value with a longer expiration date gives the holder more flexibility on when to exercise their option. This extended time window brings down the risk for the contract holder and keeps them from arriving in a tight spot. Toward the start of a contract period, the time estimation of the contract is high. In the event that the options remain in-the-money, the option cost for it will be high. If the option goes out-of-money or stays at-the-money this influences its intrinsic value, which gets to be zero. In such a case, just the time value of the contract is considered and the option value goes down. As the expiration date of the contract approaches, the time estimation of the contract falls, contrarily influencing the option price.
What is Marked to Market (MTM)?
What is Derivatives Markets?
The derivative market in India, just like abroad, is progressively picking up. Since the time derivatives were presented, their popularity has developed enormously. This can be seen in the day by day turnover of the derivatives segments on the National Stock Exchange.
What is the Use of Derivatives?
Earn cash on shares:
So you would prefer not to sell the shares that you purchased for the long term, however, you need to earn money for the short term process. The derivatives market permits you to direct trade without selling any share. This process is also called as physical settlement.
Advantage from arbitrage:
Arbitrage trading is nothing but buying the share at a lower price and selling them at a high price.
The most imperative utilization of these derivatives is to transfer the risk from one to another. Risk-averse investors use derivatives to upgrade the safety, while some risk-loving investors prefer trades to enhance their profit.
Who are the Participants in Derivatives Markets?
- The particpants of the Derivative markets are are similar to amy other financial market. They can be classified into four categories – Hedgers, Speculators, Margin traders, and Arbitrageurs. They are explained as follows:
HEDGERS: When someone invests in financial markets to reduce the risk of price volatility in exchange markets, they are called Hedgers. In this way, they eliminate the risk of future price movements.
- SPECULATORS:These are people who take a perspective on the future direction of the markets. They take a perspective whether prices would rise or fall in future. Speculation refers to purchase of any financial instrument or an asset that an investor speculates that they’ll become significantly valuable in the future.
- MARGIN TRADERS: There are large numbers of speculators trade use of the payment mechanism to the derivative markets. This is called margin trading. When you want to trade in derivative products, you are not required to pay the aggregate amount of your position in advance. Rather, you are just required to deposit just a small amount of the total amount called margin. With a small deposit, you have the capacity to keep up a huge exceptional position. The leverage factor is fixed; there is a limit to the amount you can borrow. The speculators can buy four to five times the amount that his capital investments have permitted him to buy in the cash market. This kind of trade is called settlement.
- They take positions in financial related markets to acquire riskless profits. The arbitrageurs take short and long term process, in the same or different contracts, in the meantime to make a position which can create a riskless profit.
How to Trade in Derivatives Market?
- Research: This is the first most and more important for the derivatives market. The techniques are different from those of the stock market. For instance, you may wish you buy stocks that are liable to ascend later on. Then, you buy a transaction. This would require you to go into a sell transaction in derivatives market.
- Always keep the requisite margin amount: Stock market rules oblige you to always keep up your margin amount. You can’t withdraw this amount from your trading account anytime until the trade is well-settled. Also, the margin amount may vary as the price changes. So, we recommend you to keep the additional amount in your account.
- Conduct the transaction through your trading account: You will need to first ensure that your account allows you to trade in the derivatives market. If not, counsel your broker and get the required services to be initiated. When you do this, you can submit an order either online or on the phone with your broker. Select your stocks and their contract basics amount you have, the margin requirements, the price of the basic shares, and the price of the contracts. You need to pay a little amount of money to buy the contract. You have to hold up until the contract is scheduled to expiry to settle the trade. You can pay the whole amount or you can entre in opposing trade. For example, you put a “buy trade” for Infosys futures at Rs 3,000 a week prior to expiry. If you leave the trade before, you can put a ‘sell trade’ future contract. On the off chance that this amount is higher than Rs 3,000, you can get profit otherwise, it may end up with loss.
What are Stock Futures?
Stock futures are derivative contracts that give you the ability to buy or sell a contract of stocks at a fixed cost within a specific date. When you buy the contract, you are committed to maintaining the terms and conditions. Qualities of future contracts:
- Contract size: In the derivatives market, contracts can’t be traded for a solitary share. Rather, every stock future contract comprises of a fixed lot of the basic share. The span of this lot is controlled by the exchange markets on which it is traded. For example, a Reliance Industries Ltd. (RIL) future contract has a lot of 250 RIL shares, i.e., when you buy one futures contract of RIL, you are really trading 250 shares of RIL.
- Expiry: All three maturities are traded at the same time on the exchange and lapse on the last Thursday of their individual contract months. On the off chance that the last Thursday of the month is an occasion/any formal holiday for exchanges, they expire on the previous business day. In this way, as close month contracts expire, the middle-month (2 months) contracts get to be close in a month (near-month)(1 month) contracts and the far-month (3 months) contracts become middle-month contracts.
- Duration: Contract is an agreement for transactions. How far future contract is chosen by the contract duration. Future contracts are available in the duration of 1 month, 2 months and 3 months. These are called near a month, middle month and far month respectively. When the contract expires, another contract is presented for each of the three durations. The month in which it expires is known as the contract month.
What are the advantages and risks of futures contracts?
Advantages of future contracts:
- For most of the commodities/currency market, the margin requirements are well defined. So, an investor has a fair idea of how much margin he/she should keep in his/her account.
- Most of the Futures market e.g. currencies, indexes, and some commonly traded commodities, offer high liquidity. This means traders can enter and exit the market whenever they want.
- Traders enter the Futures Contracts for better risk management. These contracts limit risk that may arise from forign currency exchange.
- Advantages of future contracts:
Futures Contracts have an expiry date. So, the price of a contracted asset may become less attractive when the expiration date is nearer.
- There’s no control over future events. So, any unexpected events like natural calamities, political issues can disturb the demand supply equlibrium.
- The principle risk stems from the enticement to speculate unnecessarily because of a high leverage factor, which could open up losses in the same way as it increases profits.
What is the Cost of Carry Model?
What is the Expectancy Model of Futures Pricing?
What is Initial Margin?
What is Stop Loss (SL)?
What are the Prerequisites of trading?
Related Bank investment account
Alice blue Trading Account(If you choose to trade with us)
Clarification on BO/CO Orders
Bracket Order (BO)
Intraday trade using BO on Equity, F&O, and Currency. In a BO you can place intraday buy/sell limit orders with a target and compulsory stop loss (with a trailing SL option) for higher leverage than trading using product type as MIS. All open BO positions get auto squared off before the end of the day (Equity & F&O: 3.15pm, Currency: 4.15PM Margin requirement will vary based on the Stop loss price Commodity: 15mins before close).
Cover Order (CO)
Intraday trade using CO on Equity, F&O, Currency & Commodity. In a CO you can place intraday buy/sell market orders with a compulsory stop loss for higher leverage than trading using product type as MIS. All open CO positions get auto squared off before the end of the day (Equity & F&O: 3.15pm, Currency: 4.15PM, Commodity: 15mins before close). Margin requirement will vary based on the Stop loss price.
Detail Description on BO/CO Orders.
- In BO, a trader cannot exit a position partially. The client has to exit all at once.
- Bracket order cancellation is not possible once entered. The order can be closed only by closing the position.
- Bracket order is not permitted in Stock Options, Currency options, and Commodity Options & other group categories apart from a group in NSE Cash.
- While drastic movement, there are chances of executing both pending leg orders. (Target and Stop Loss). So BO orders are not suggestible at the time of drastic Volatility.
- Limit orders are not possible during exit.(While Exit the Leg Order It will be executed at Market Price)
- If the markets are volatile, then System will may not consider Stop Loss price and may execute the order at the best available price.
- When placing a bracket order if the order gets filled in multiple executions, each of the execution will be considered as a separate order and Client will be charged brokerage & taxes separately for each partial fill. The same applies for Bracket orders squared off by our RMS team as well.
- Traditional & Freedom BO/CO Limits will change after April (Fix the limits and same update in site)
- Any news or impact on particular Stocks/Futures RMS will block the BO/CO.
- Sudden drastic movements RMS have rights to cover the position of BO/CO.
- While placing or modifying the orders, it is recommended that to place SL when the client wanted to buy above the market price and sell below the market price. This will avoid unnecessary confusion to the client for the traded prices.
- When trying to modify any BO pending order, please be patient until the order gets modify completely.
- Please avoid placing fresh orders at the time of market opening in any segment.
What is a Commodity Market?
Why Invest in Commodities?
- Diversification: Commodity returns have verifiably had low or negative connections with the profits of other significant assets, and may be utilized to differentiate a portfolio. Different variables staying the same, differentiated portfolios with low total correlation have a tendency to have lower unpredictability of profits. So, expansion may enhance risk-balanced returns.
- Transparent: The transparent is huge cooperation that has guaranteed commodity futures.
- Simple: Product exchanging is about the simple financial aspects of demand and supply. More the demand for a commodity to higher is its cost and vice versa.
- Trade on Low Margin: Commodity trading is required to maintain low margins, around 5 to 10% of the aggregate estimation of the contracts. This is much lower than other assets classes.
- Inflation protection: Changing macroeconomic variables tend to affect items uniquely in contrast to other budgetary items. Costs of goods and services ascend in pair with input costs, while costs of stocks and bonds tend to decay due to rising commodity input costs which put more pressure on the economy and lower the estimation of future cash flows.
- Wide Participation: The online exchanging stage and the transparent policy strategy has pulled in wide support in the commodity market.
- Reasonable Pricing: The evaluating characterizes for commodities would be practical and less nonsensical prompting to Fair Price Discovery Mechanism in light of the number of members in the market.
- Hedging: It gives a stage to traders to hedge off their positions as indicated by the development of the prices of the commodity..
What are the Tradable Commodities?
- Bullion: Gold and Silver
- Oil and Oilseeds: Castor Seeds, Soy Seeds, Castor Oil, Refined Soy Oil, Soy supper, Crude Palm Oil, Groundnut Oil, Mustard Seed, Mustard Seed Oil, Cottonseed Oilcake, Cottonseed
- Flavors: Pepper, Red Chili, Jeera, Turmeric, Cardamom Metals: Steel Long, Steel Flat, Copper, Nickel, Tin, Steel, Aluminum, Zinc ingots
- Fiber : Kapas, Long Staple Cotton, Medium Staple Cotton
- Beats: Chana, Urad, Yellow Peas, Tur, Yellow Peas Grains: Rice, Basmati Rice, Wheat, Maize, Sarbati Rice, Jeera
- Vitality: Crude Oil, Natural Gas, Brent Crude
- Others: Rubber, Guar Seed, Guar gum, Cashew, Cashew Kernel, Sugar, Gur, Coffee, Silk, Sugar.
What is a Futures Contract in Commodity Market?
What are the Charges in Commodity Trading?
- Service Tax as per the rates applicable
- Exchange Transaction Charges
- Stamp Duty: As per State Law
Who regulates the Commodity Market?
Which are the Major Commodity Exchanges in India?
- Multi Commodity Exchange of India Ltd, Mumbai (MCX)-website- www.mcxindia.com: MCX is a free and de-mutualized multi thing trade. MCX highlights amongst the world`s main three bullion trades and main four vitality trades. It’s key shareholders are Financial Technologies (I) Ltd., State Bank of India and its partners, National Bank for Agriculture and Rural Development (NABARD), National Stock Exchange of India Ltd. (NSE), Fid Fund (Mauritius) Ltd. – a member of Fidelity International, Corporation Bank, Union Bank of India, Canara Bank, Bank of India, Bank of Baroda, HDFC Bank and SBI Life Insurance Co. Ltd.
- National Commodity and Derivative Exchange, Mumbai (NCDEX)- website-www.ncdex.comA consortium of establishments advances NCDEX. These incorporate the ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC), National Bank for Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSE).
- National Multi Commodity Exchange of India Ltd, Ahmedabad (NMCE) www.nmce.com It is the first de-mutualised electronic multi-commodity Exchange of India. Some of its key promoters are Central Warehousing Corporation (CWC), National Agricultural Co-Operative Marketing Federation of India Limited (NAFED), Gujarat Agro Industries Corporation Limited (GAIC) and Punjab National Bank (PNB).
- National Spot Exchange Limited (NSEL) National Spot Exchange Ltd (NSEL) is the best in class electronic, de-mutualized commodity spot market. The Exchange is advanced by Financial Technologies (India) Ltd (FTIL) and National Agricultural Cooperative Marketing Federation of India Limited (NAFED).
What is a Forward Contract in Commodity Market?
Can I take Delivery of the Commodity?
- A settlement happens either through squaring off your position or with money settlement or physical delivery. When a trader buys or sells a particular quantity of an asset and later in the day reverses the transaction, in the hope of earning a profit, it’s called Squaring off the position.
- Investor who plans to plus or minus delivery would need to advise his agent of the same before they begin of the delivery period. In the event of delivery, a stockroom receipt is given. Delivery is at the option of the seller; a buyer can take delivery just if there should arise an occurrence of an eager seller. All unmatched/rejected/excess positions are money settled; every single open position for which no delivery data is submitted is additional money settled. Under money settlement, the difference between the contract cost and settlement cost is to be paid or got from them. In online commodity exchanging, the customer can’t go for delivery and all positions are cash-settled.
What is Margin Trading Facility?
It is a facility offered to an investor in buying of shares and securities from the available resources by allowing him to pay a fraction of the total transaction value called a margin. The margin can be given in the form of cash or shares as collateral depending upon the availability with the respective investor. In short, it can be termed as leveraging a position in the market with cash or collateral by the investor. In this transaction, the broker funds the balance amount.
Till last year MTF was allowed against the cash margin not against shares as collateral. Now Securities Exchange Board of India (SEBI) has relaxed the said criteria vide its circular no. SCIR/MRD/DP/54/2017 dated June 13, 2017. Investors are now allowed to create a position under MTF against shares as collateral as well.
SEBI and Exchanges monitor tightly the securities eligible under the MTF and margin required (through cash or shares as collateral) on such securities are prescribed by them from time to time. Currently, the securities forming part of Group 1 securities are included in MTF.
Features of MTF:
- Investors who wish to avail the MTF need to undertake by signing/accepting additional Terms and Conditions. It ensures that investors are completely aware of the risk and rewards of trading in it.
- Allows investors to create leverage position in securities which are not part of derivatives segment.
- The positions can be created against the margin amount which can be in the form of cash or shares as collateral.
- Securities allowed under MTF are predefined by SEBI and Exchanges from time to time.
- Only corporate brokers are allowed to offer MTF as per SEBI regulations.
Benefits for Investors:
- MTF is ideal for investors who are looking for benefit from the price movement in short-term but not having sufficient cash balance.
- Utilization of securities available in portfolio/demat account (using them as shares as collateral).
- Improve the percentage return on the capital deployed.
- Enhance the buying power of the investors.
- Prudently regulated by the regulator and exchanges.
What is a Basic Service DEMAT Account?
It is a DEMAT account which is intended for small investors who don’t or can’t invest regularly in stocks, bonds, ETFs, etc.
This can be opened and maintained at a reduced cost.
SEBI felt that the majority of DEMAT account holders don’t really use their accounts as much as they should and still end up paying high maintenance fees. So, to help out such investors they came up with this account type.
A criterion for BSDA is that you need to have only one single DEMAT account i.e the BSDA needs to be your only DEMAT account across all depositories.
The Annual Maintenance Charges (AMC) structure for BSDA shall be on a slab basis on the value of holding illustrated below:
|Debt||Upto Rs 1,00,000||No AMC|
|Rs 1,00,000 to Rs 2,00,000||Rs 100|
|Non-Debt||Upto Rs 50,000||No AMC|
|Rs 50,000 to Rs 2,00,000||Rs 100|
If you hold a combination of both debt and non-debt holdings, you can remain exempt from AMC charge upto Rs 1,50,000(Debt- Rs 1,00,000; Non-Debt- Rs 50,000) or pay Rs 100 upto Rs 4,00,000((Debt- Rs 2,00,000; Non-Debt- Rs 2,00,000)
The brokerage and taxes remain the same for BSDA and regular accounts.
The value of holding shall be determined by the DPS (a broker in this case) on the basis of the daily closing price or NAV of the securities or units of mutual funds. If the value of holding in such BSDA exceeds the prescribed criteria at any date, the DPs may levy charges as applicable to regular accounts (Non-BSDA) from that date onwards.
For more information, you can refer to the SEBI notification.
What are the key advantages of participating in a depository?
The key advantages are:
- You tend to eliminate the risk which is usually associated with physical securities such as theft, fake securities, damages..etc.
- One can transfer the securities immediately.
- Stamp Duty is not applicable on securities transfer.
- Paperwork gets reduced greatly as everything gets updated online.
- When there is a change in the address recorded with DP the same gets updated with all the companies where the investor holds the securities
- Transaction cost also gets reduced.
- You can nominate.
- Even transmission is also done by depository participant thereby correspondence with companies is eliminated.
- All in single account where it is investments in equity, government securities and debt instrument
- Share credits get automatically added to the Demat account
What are the facilities one can enjoy in a DP account?
Facilities in a DP account are the following:
- Dematerialisation which means conversion of physical share certificates into electronic / online form
- Rematerialisation which means conversion of electronic demat from to physical share certificates
- It helps in repurchase or redemption of mutual funds units
- It settles the trades through online process
- It facilitates the pledging or hypothecation of dematerialized securities
- In public issues it enables electronic credit of secutities
- Non-cash benefits such as bonus from securities are automatically credited
- One can also freeze a demat account so that the debits can be stopped
- Nomination is possible
- Facilities related to change of address is possible with utmost ease
- Facilities such as stock lending, borrowing options, debt instrument holding ..etc
Is there any minimum prescribed balance of securities to hold in my Alice Blue Demat account?
If I have to change the signature, what is the procedure with Alice Blue?
A single account for holding my and my spouse’s shares permitted?
If I have physical share certificates with a different sequence of names of me and my spouse what should be done in such a case?
Can I authorize someone to operate my account on my behalf as power of attorney?
Is it compulsory to give my bank account details during Demat account opening?
What if I have to change the details of my bank account?
What does “Standing Instruction” mean and how it is helpful for me?
Is it possible to operate my joint account on “either or survivor” basis?
Is it possible to add or delete account holders or change ownership preference?
If my address gets changed should I update to all the companies of which I hold shares?
Can I make use of the nomination facility?
Can Joint account holders nominate?
Can a NRI nominate his Demat account?
Is it possible for a minor to nominate for this Demat account?
Who is eligible to be a nominee?
Is it possible for a minor to be a nominee?
Is it possible to have more than one nominee?
Is it possible to make separate nomination for every security held in a depository account?
Is it possible for a NRI to be a nominee?
Can you tell me the procedure for nomination?
The procedure to nominate is in two simple steps :
- Filling of nomination form with nominee details.
- The nominee has to sign the form and share the photo & contact details. In case of minor, guardian details have to be additionally submitted.
Can I change a nominee?
When does transmission happen in Demat accounts?
When an account holder is deceased, how can the nominee initiate the transmission process to his name?
Is it possible to have an account with no nomination and what would happen to the account after the account holder is deceased?
Can you brief the procedure for transmission in case of Joint Accounts?
What is the Meaning of Dematerialization?
Is it possible to Dematerialize any share Certificate?
Precautionary measures to be taken while defacing a share certitificate?
How much time does it take to Dematerialize?
How to Demat shares with Premarital or maiden names?
What are the different types of securities available for dematerialization?
The different types are as follows :
- Shares, bonds debentures, debenture stock, scrips, or other marketable securities of similar nature of any incorporated company or body corporate including underlying shares of ADRs and GDRs.
- Units of mutual funds, certificate of deposit, rights under collective investment schemes and venture capital funds, commercial paper, securitized debt, money market instruments, and unlisted securities are the securities available for dematerialization.
Is it possible to dematerialize my shares which are pledge in bank who is also a DP?
Is it possible to dematerialize odd lot of shares?
What does Rematerialization mean?
What do these terms mean “ Market Trades” and “ Off Market Trades”?
- “Market Trades” are those trades that were in the trades that have taken place with the involvement of a clearing corporation. These type of trades are done by stockbrokers on a stock exchange.
- “Off Market Trades” are those trades that are done between the two parties directly without the involvement of the clearing corporation. In either case, same delivery instruction slip is used.
What type of settlements are required on the delivery instruction slip?
How would I be getting my cash entitlements in the form of dividends and interests to my account?
Then how my bonus shares or other non-cash entitlement benefits reach me?
Who will an investor confirm that the bonus / rights entitlements are credited to his account?
How to freeze my account?
Does it become necessary to have a depository account if I apply for shares in Rights Issue / IPO?
Is it possible to have the other securities in my same demat account?
Is it possible to buy and sell shares through Alice Blue Demat?
Is it possible to dematerialize all my securities through the same account?
Submit your Financial Proofs in BOT?
Any of the below documents will suffice as financial proof –
- Bank account statement for the last 6 months (latest)
- Latest salary slip
- Copy of ITR acknowledgment
- Copy of Form 16 in case of salary income
- Net worth Certificate issued by a Chartered Accountant
- Statement of Demat holdings.
Kindly submit the above-mentioned documents to have continued access to F& O trading on our platforms.
To submit your Financial Proofs, Follow the steps:
Step 1: Kindly login into BOT
Step 2: Click here for the Link
Step 3: Attach the Financial income proof and submit.