Top Benefits of availing MarginPlus are:
1. Zero cash margin requirement for Intraday trades across all segments, no interest charged.
2. No need to maintain 50% cash margin in F&O (Lowest in the industry starting @10.95% p.a.).
3. Avail upto 100% cash margin funding for cash delivery orders @ 0.06% per day.
4. Real time activation of MarginPlus while placing orders across segments.
5. Increase your ROI on short term trades with the help of funding.
For interest rates, kindly refer the table below:
|Particulars||Rates for Cash Margin Benefits|
|Intraday (All Segments)||0.00%|
|Overnight Rates F&O Segment||0.04% Per Day (Networth Below ₹5 Lakhs*)
0.03% Per Day (Networth Below ₹5 Lakhs*)
|Rates on Delivery Cash Segment(MTF)||0.06% Per Day (Networth upto ₹5 Lakhs*)
0.05% Per Day (Networth between ₹5 Lakhs to ₹1 Cr*)
0.045% Per Day (Networth above ₹1 Cr*)
**Networth includes your holdings in cash & stocks on 5Paisa.
Increase your purchasing power with MarginPlus !
What are Futures and Options?
Derivatives trading is a big thing in the stock market today. Future and options are also derivatives of stock trading using a contract and at a later date. Trade futures contracts deal in stock through a contract executed between two parties wherein the stock's price is predetermined. Similarly, options trading is also a method of making a contractual deal on selling stock later at a fixed price.
However, there is one fundamental difference between futures derivatives and options trading. While a trade futures contract must necessarily be executed at the stipulated date (meaning that the sale must happen towards the purchaser), in options trading, the buyer has the right but is not obligated to buy the agreed trade derivative. It would appear that options trading is a tad safer than futures trading, with the buyer retaining the right to reject the trade if stock prices are not favourable on the date of the contract.
F&o trading is, more often than not, utilized as an effective method of hedging by market professionals. Deciding the derivative price beforehand and executing a contract helps them seal the sale price if the stock price does not seem to be rising.
With that said, this mode of trading comes with its risks. When a futures and options trader assumes a position on a stock and deals a contract on that value, the price is sealed – if the stock sways opposite, the traders stand to shoulder massive losses.
Futures and options trading isn't for everyone since it requires deep knowledge of the stock market dynamics and an intuitive idea of where a stock price would go in the next few months or days. There are three kinds of professionals who typically participate in f&o trading. Let us see who they are.
Hedging is a trading strategy that aims at reducing the underlying risk in the financial derivatives being traded. By limiting the volatility in stock prices by trading f&o, hedgers can make profits when the conditions of their stock are not favourable. However, when the price of the concerned stock increases during the contract period, hedgers who deal in futures are likely to incur heavy losses. Here, those who trade in options may save their investment by not going through with the purchase.
These professionals buy and sell their futures options based on a forecasted stock price pattern. Speculators keenly observe stock behaviour on the market and predict a rise or fall. If a stock is predicted to rise, speculators purchase it at a lower price to sell it later when the value is higher, and vice versa.
These professionals work on the big picture of future option trading. By dealing in high volumes, arbitrageurs attempt to offset the profits and losses in f&o trading to a positive difference and consequently cash in on risk-free profits. These professionals have a keen eye for trading and benefit from the market's inefficiencies.
Trading in futures and options exposes investors to highly lucrative market environments that work in multiplied profits based on the decided margin. Professionals who wish to reduce the risks associated with market volatility are the ones who engage in futures and options trading; however, someone wishing to gain more exposure in this market can also plunge in at his own risk. Futures and options do present a very chance of high returns. However, for the unversed, the losses are high too.
Advantages of Futures Trading
Based on the stock price moving in the predicted direction, a futures contract holder can profit in direct multiples of the decided margin with the futures broker depending on future and options in share market.
Price fluctuation is not very drastic, owing to the high volume of futures floating in the market, making these investments very liquid.
With futures trading, brokers charge very low commissions and brokerage.
Advantages of Options Trading
Options trading is cost-efficient. Compared to buying stock directly, the investor can get more leverage and higher volume when trading in the same stock options if he selects the right call.
Options have lesser risk than futures, given that it is not compulsory to go through with the purchase in case prices are not favourable.
Options have a higher percentage return on investment than trading stock directly, which appeals to many seasoned investors.
Options provide investors with alternatives to achieve investment goals by ways other than direct trading, which accelerates profits.
There are various kinds of future and option trading available to choose from in the derivatives market. While there are quite a few futures that you can choose from to invest in, only two types of options trading instruments are available. With that said, options trading gives you a better chance at risk addressal than futures trading. Let us see what they are.
Types of Futures
Stock Futures: Derivative contracts from underlying stock are called stock futures.
Index Futures: Futures contracts trading on an entire market index are index futures.
Currency Futures: Futures contracts that trade currencies against each other are currency futures.
Interest Rate Futures: Futures trading on debt instruments are called commodity futures.
Commodity Futures: Trades in future options based on agricultural, metals, and others are commodity futures.
Types of Options
Options are basically of two types: Call and Put. Let's understand them in detail.
An options contract has a strike price that must be traded when the stipulated date arrives. A call option gives the buyer the right to buy the underlying asset at the terms of the contract signed. However, the buyer is not obligated to go through with the purchase.
Put options are in stark contrast to call options. These options give the seller the right but not the obligation to sell the option at the strike price in the contract.
Frequently Asked Questions
Derivatives are financial securities, which do not have an independent value. They rely on the value of an underlying asset. Futures and options are two types of derivatives in the capital market.
There are mainly four types of derivative contracts. They are –
- Future Contracts
- Forward Contracts
- Option Contracts and
There are four kinds of participants in a derivatives market. They are Hedgers, Speculators, Arbitrageurs, and Margin Traders.
Exchanges follow a stringent margining system for all future and options contract. Margin Requirements for each segment is different. You may click here for the details.
Though futures are most often associated with commodities, there are other segments as well where futures are available. Apart from Commodities, Futures are available in Index, Stock, Currency and Interest rate.
Forward contracts and Future contracts are similar in nature.
They both allow traders to buy or sell the specific type of asset at a given price at a given time. While a forward contract is a private and customizable agreement that settles at the end of the agreement, a futures contract has standardized terms and is traded on an exchange. Besides, a Forward Contract is usually traded over-the-counter, while in the case of a futures contract the prices are settled on a daily basis until the end of the contract.
Trading on MCX platform takes place on all days of the week (except on Saturdays, Sundays and trading holidays declared by the Exchange). Market timings are as under:
Currency Market –
USD INR, GBP INR, EURO INR & JPY INR Monday to Friday: 9:00 am to 5:00 pm
Commodity Market –
Monday to Friday: 9:00 am to 11:30 pm (up to 11:55 pm on account of day light savings typically between every November and March of the following year)
|Agri-commodities||Monday to Friday||09:00 am to 05:00 pm|
|Other commodities (such as Bullions, Metals and Energy)||Monday to Friday||09:00 am to 11:30 pm|
To trade in F&O with 5paisa, you need to activate F&O by submitting your required documents like income proofs. If you already have a trading and Demat account with 5paisa, you do not have to bear any further charges for activation of MCX segment i.e. Commodities segment. If you wish to activate your commodity segment, we request you to process the same from the below mentioned path:
Step 1: Go to www.5paisa.com and click to login
Step 2: Enter Credentials
Step 3: Click on Client code mentioned on the top right corner
Step 4: Click on Client code on the top right side of your page >> Select Profile >> My Segments >>Personal details.
Step 5: Click on the option across segment not selected, select the F&O Segment (F&O includes MCX and Currency derivatives too for the new requests).