FAQS

Can I nominate more than one person?

You can nominate only one person per mutual fund folio that is held by you. But if you have more than one folio, you can appoint different nominees for each folio.

What is the effect of selling a call option?

The seller of the call option has an obligation to sell the underlying asset at the strike price if the buyer of the call option chooses to execute his right. The seller receives a ‘Premium’ from the buyer.

When does the buyer of a call option benefit?

The buyer of the call option benefits when the price of the underlying asset is above the strike price at the expiry of the contract.

When does the seller of a call option benefit?

The seller of the call option benefits when the price of the underlying asset is below the strike price at the expiry of the contract.

What is a ‘Put’ option?

An option which gives the buyer of the options contract the right, but not an obligation, to sell the underlying asset at the strike price on a specified date in the future.

What is the effect of buying a put option?

The buyer of the put option has the right, but not an obligation, to buy the underling asset at the strike price at expiry. The buyer of a put option has to pay a premium to the seller for the privilege.

What is the effect of selling a put option?

The seller of the put option has an obligation to buy the underlying asset at the strike price if the buyer chooses to execute his right. The seller receives a premium from the buyer.

Can the options buyer execute his right at anytime during the lifetime of the contract?

No, the buyer of the option can execute his/her right only at the expiry of the contract.

How is margin calculated for buying options?

To buy either calls or puts, the margin requirement is only to the extent of the premium. Margin for buying options = Premium * Total Quantity

What is the effect of buying a call option?

The buyer of the call option has the right, but not an obligation, to buy the underlying asset at the strike price at expiry. The buyer of a call option has to a pay a ‘Premium’ to the seller for the privilege.

What is a call option?

An option which gives the buyer the right, but not an obligation, to buy the underlying asset at a predetermined price on a specified date in the future.

How is options trading different from futures trading?

In case of futures trading, the buyer and seller have unlimited profit potential as well as loss potential. Where as in options, the buyer has unlimited profit potential with limited downside, and the seller has limited profit potential and unlimited downside.

Can I change or cancel the nomination made by me?

Yes.

Are there risks involved in investing in mutual funds?

Mutual funds invest in various financial securities such as shares, debentures and deposits. All these investments involve an element of risk, hence the returns of the mutual fund are linked to their perfomance.

What is Exit Load?

The fee paid to the Asset Management Company at the time of either redemption or transfer of units from one scheme to another, is termed as exit load. This fee is deducted from the NAV at the time of redemption/transfer of units.

Does every mutual fund charge Exit Load?

No. It differs from one scheme to another.

When will I be able to see my purchase details?

The details will be communicated to you within 3 days from the date of transaction (T + 3 days).

What are options?

An option gives the buyer the right, but not an obligation, to buy or sell the underlying asset at a predetermined price (Strike Price) on a specified date in the future (Expiry). The buyer pays the seller a premium at the time of entering into the contract.

What is Stike Price in an options contract?

It is the price at which the underlying asset is agreed to be bought/sold at the expiry of the contract.

What is ‘Premium’?

Premium is the downpayment that the buyer is required to make to the seller for entering into the options contract.

How is margin calculated for selling options?

Since the seller of the option is exposed to a greater risk than the buyer, the margin requirement is greater for the seller. The exchange stipulates margin requirements based on the volatility of the underlying asset. Check our margin calculator

What is moneyness of an option?

Moneyness is a term describing the relationship between the strike price of the option contract and the current market price of the underlying asset. There are three types of moneyness, In-The-Money (ITM), At-The-Money (ATM) and Out-Of-The-Money (OTM).

What does In-The-Money (ITM) options mean?

An option is said to be In-The-Money, if upon exercising it, the option buyer gets a positive cash flow.

How is profit exercised on exercise?

The profit/loss upon exercise is the difference between the exercise settlement price of the underlying asset and the strike price of the contract. The difference is then multiplied by the exercised quantity (Applicable statutory levies and taxes will be borne by the investor).

Can only a portion of the quantity be exercised?

No, the exchange exercises the entire quantity.

What is assignment?

Is a situation where the seller of the option will have to sell the underlying asset at the strike price, incase of call options, and buy the underlying asset at the strike price, incase of put options. However, in India, all options contracts are settled in cash, the seller will either have to pay or recieve money.

Does the seller have any control over the assignment?

No, the exchange has complete control over the assignment process.

Is MTM applicable in case of options?

Yes, but the MTM process is applied only for the sellers of the options contract.

What is options spread?

An options spread is when the investor buys as well as sells options of the same underlying security but of different strike prices and/or different expiries.

What are Vertical Spreads?

Vertical spreads are created when the investor uses options of the same underlying security and same expiry series but of different strike prices.

What are Horizontal Spreads/Calendar Spreads?

Horizontal Spreads or Calendar Spreads are created when the investor uses options of the same underlying security and the same strike prices but with different expiry series.

How can I exercise my options at expiry?

All ITM options will automatically be exercised by the exchange on the last day of contract expiry.

What is Intrinsic Value?

Intrinsic Value is the difference between the underlying security’s current market price and the strike price of the option contract. Only In The Money options have intrinsic value.

What is the impact of moneyness on options premium?

It is widely seen that ITM options command the highest premium, followed by ATM options and lastly by OTM options.

What is In-The-Money (ITM) Call option?

A call option is said to be ITM when the underlying security’s current market price is greater than the strike price of the contract.

What is In-The-Money (ITM) Put option?

A put option is said to be ITM when the underlying security’s current market price is lesser than the strike price of the contract.

What is Out of the Money (OTM) options?

An option is said to be out of the money, if upon exercising it, the option buyer gets a negative cash flow.

What is Out of the Money (OTM) Call option?

A call optin is said to be OTM when the underlying security’s current market price is lesser than the strike price of the contract.

What is Out of the Money (OTM) Put option?

A put option is said to be OTM when the underlying security’s current market price is greater than the strike price of the contract.

What is At the Money (ATM) options?

An option is said to be at the money if spot price of the underlying is equal to the strike price. Any movement in spot price of underlying from this stage would either make the option ITM or OTM.

What is At the money (ATM) Call option?

A call option is said to be ATM when the underlying security’s current market price is equal to the strike price of the contract.

What is At the Money (ATM) Put option?

A put option is said to be ATM when the underlying security’s current market price is equal to the strike price of the contract.

What are Diagnol Spreads?

Diagnol Spreads are created when the investor uses options of the same underlying security but with different strike prices and different expiry series.

Can I nominate a minor as my nominee?

Yes. However, upon appointing a minor as your nominee, you would be required to provide the name and address of the minor’s guardian in the nomination form.

Do themes bought through Fyers thematic investing reflect in the demat account?

Yes themes bought through our thematic investing portal will reflect in your demat account.

How can I invest more in Fyers thematic investing?

You can invest more by either buying more of the same theme or diversifying by buying different themes. You will need a sufficient account balance to invest in either case.

How can I buy a theme?

Firstly, you will need to have a trading & demat account us. You can transact in the themes after using your client login credentials. Just make sure you have sufficient account balance.

How much is the minimum amount required to buy a theme / portfolio in Fyers thematic investing?

The minimum investment amount will be the value of the smallest theme. You can invest any amount higher than that. Also, there is no upside limit to the amount you can invest per theme. You can also re-adjust the weightages and stocks to suit your needs.

How long should I hold a theme / portfolio made by Fyers Thematic investing?

You can hold a theme for as long as you want. You can optimize it by rebalancing it on a regular basis based on our updates. Reviewing and updating themes is based on our in-house proprietary research mechanism. Stock markets changed dynamically and swiftly. So we will keep you updated regarding these changes on our portal. However, you must note, that the purpose of thematic investing is to build a smart portfolio of stocks. So our aim is to balance your investments and not to try and time extremely short-term stock price fluctuations.

Can I buy a theme / portfolio after-market hours using thematic investing?

Right now, you can only buy during the stock market hours between 9:15 AM to 3:30 PM on normal working days.

Are themes updated in Fyers thematic investing?

Yes, all thematic portfolios are reviews and updated on a period basis. Since stock markets are in dynamic trends, we find companies poised to benefit from them and help you rebalance them to stay tuned with developments.

How is a theme / portfolio created in thematic investing?

Our in-house research team conducts in depth market research using the top-down approach. We use a wide universe of stocks to find the most suitable investments. Extensive fundamental research is done to allocate the best stocks and alternatives. Our thematic portfolios seek to identify and exploit powerful themes that may drive profits across industries.

What is a theme index?

A theme index represents the value of the particular theme / portfolio of stocks. At the beginning, the value is set to 1000 by default. The index value is a means to track the performance of the theme. For example, if the value has increased to 1100, it means that the theme is up by 10%.

Can NRIs invest in themes / portfolios?

Yes, you will need to be our client. Get in touch with us for more information.

What is rebalancing in thematic investing?

Rebalancing is a way of staying in tune with the thematic idea. A rebalancing means replacing, adding or removing stocks from a theme to make it better. You can optimize it by rebalancing it on a regular basis based on our updates. Reviewing and updating themes is based on our in-house proprietary research mechanism.

What are the charges for thematic investments?

The charges are a flat fee of ₹100 per theme.

Do I need a demat account for thematic investments?

Yes you do need a demat account to buy and hold equity investments.

Will the buy price of an order be the same as the amount I confirmed in thematic investing?

Since market orders (IOC) are being placed at the current market price, there is always a likelihood that stock prices have changed by the time your orders are completed successfully.

Can the orders placed for thematic investing be modified or cancelled?

No. Since the orders placed are market orders (IOC), they cannot be cancelled or modified.

What happens if the orders placed are not completely filled for thematic investments?

In the event that orders are not filled due to some issues, you can either place fresh orders for the orders which have failed.

What are the kind of orders placed in thematic investments?

The orders places are market orders with IOC validity (Immediate or Cancel). What this means is that when you place an order, it gets filled at the current market price immediately or is cancelled immediately.

Will my returns be exactly the same as the portfolios / themes in the website?

This is because the weightage cannot be exactly the same due to the differing value of different stocks. This is a determining factor why your returns cannot be exactly the same as the return mentioned in the website. Since it is not possible to by fractional shares in India the limitation does exist.

How do I track the performance of my thematic investments?

You can track the performance of themes by tracking the index value. When you make the investment, the index value is set to 100 by default. If the value of the index goes up, it will reflect in the index value too. Let’s say it goes up to 110. It means that the theme is up by 10%.

Do I have to pay fees separately for thematic investing?

No. The fees are automatically debited from your trading account and you do not have to pay anything separately. It is hassle-free.

What is a theme in thematic investing?

A theme is a mini portfolio of stocks which revolve around a particular idea or sector. Themes are intelligently designed to help investors build a good portfolio surrounding different ideas rather than individual stocks only. It is a futuristic way of investing in the Indian stock market. For those who are keen on investing but don’t know how to start, this is your go-to portal for building an optimal portfolio. Choosing this route, gives you a hassle-free experience as themes are rebalanced periodically to help you stay tuned with current developments in the stock market.

How do I start thematic investments?

You can use our portal for viewing purpose only for a limited period of time. However to start investing, you will need to open a trading & demat account with us.

In what ways is thematic investing easier than regular investing?

Thematic Investing give you the exposure to different trends via intelligently designed portfolios of stocks. The chosen stocks tend to be suited to the specific theme and are carefully researched using the top-down approach. You can choose from the wide array of portfolios based on what you think will do well. So instead of focusing on researching stocks, you can spend time identifying large trends of the future. You can stay tuned with the dynamic shifts in stock movements by our rebalancing facility which happens on a timely basis. You can also sell one theme and buy another wherever you see fit. Overall, your portfolio will also be less volatile and you get a better exposure to what you are looking for.

What are Balanced/Hybrid Funds?

The aim of balanced funds is to provide the best of both growth as well as income funds. Such funds are suitable for investors looking for moderate growth with lesser risk.

Can Non-Resident Indians (NRIs) invest in mutual funds?

Yes. For further details, contact our support team.

What are Money Market or Liquid Funds?

These funds are also income funds and their aim is to provide preservation of capital, liquidity and moderate returns on investment. Such funds are suitable for investors looking for safety as well as to generate moderate returns on surplus funds for a short period of time.

What are Gilt Funds?

These funds invest exclusively in government securities and have no default risk.

What are sector specific funds/schemes?

Such mutual fund schemes invest in the securities of only a specific sector or industry, as specified in the offer documents.

What are Growth Plans?

Growth plans aim to provide only capital appreciation to the investors. They do not distribute the income earned to the investors in the form of dividend.

What are Dividend Plans?

Mutual funds dividend plans distribute the income that they earn from time to time. These plans are ideal for those investors who require a regular income.

What are Dividend Reinvestment Plan?

Dividend plans have an additional option for reinvestment of income distribution. Under this plan, dividends declared by a fund are reinvested on behalf of the investor, thus increasing the number of units held by the investors.

What are Debt Oriented Schemes?

The aim of income funds is to provide regular and steady income to investors. Such funds are less risky and are advisable for investors seeking a short term return on their investment.

What are Equity Oriented Schemes?

The aim of equity funds is to provide capital appreciation over the period of investment. Such funds have comparatively higher risk and are advisable for investors having a longer-term outlook.

Can I exit Close-ended Funds/Schemes prior to maturity?

Yes. SEBI regulations stipulate that at least one of the following two exit routes be provided to investors of close-ended funds/schemes:

1) Investors can sell the units of the fund/scheme on the stock exchanges where the units are listed.

2) Some close-ended schemes provide an option of selling back the units to the mutual fund at the respective NAV prices.

Who can invest using thematic investing?

Anyone who has an account with us is eligible for thematic investments. Our platform can be used by new and experienced investors alike. It allows you to choose from intelligently designed portfolios of stocks. You can get exposure to different types of trends in the Indian stock markets at the same time. It is an efficient and innovative way of building long-lasting portfolios.

What is Thematic Investing?

Thematic investing allows you to invest in different themes or portfolios without getting into the stock specifics. Since people think more in terms of ideas than fundamental facts on stocks, this mechanism nurtures that aspect and helps you get better at identifying themes which will do well in the future rather than individual stocks. The stock selection happens at our end. So in effect, you can invest in several different portfolios at the same time without the hassle of detailed fundamental research. The themes are already diversified optimally to begin with. The stocks are chosen based on merit and their historical performance is displayed.

What is a mutual fund?

Mutual funds are made up of all the money pooled in by a large number of investors. This pool of money is managed by a portfolio manager, who invests the funds in various financial instruments.

What is Net Asset Value (NAV) of a scheme?

The performance of a particular scheme of a mutual fund is denoted by its NAV.

Does the Net Asset Value (NAV) vary on a day to day basis?

Yes. Mutual funds invest the money collected from the investors in the securities markets. Since the value of the securities changes every day, NAV of a scheme also varies on a day to day basis.

What are Open Ended Funds/Schemes?

Open-ended mutual fund schemes are available for subscription and repurchase on a continous basis. These schemes do not have a fixed maturity period.

What is the benefit of open-ended funds/schemes?

These funds/schemes offer liquidity to the investors.

What are Close-ended Funds/Schemes?

Close-ended mutual funds schemes are available for subscription only during a specified time period. They have a fixed stipulated maturity date.

Can a mutual fund investor appoint a nominee?

Yes, individual investors can appoint a nominee. But non-individual investors cannot appoint a nominee.

What happens if the shares are not bought during the auction conducted by the exchange?

If auction fails, then the exchange will close out the transaction by settling the buyer’s obligation in cash. The close out price paid to the buyer will be the highest price of the stock from the transaction day till the auction day or 20% higher than the official closing price on the auction day, whichever is higher.

What is trailing stop loss order?

A trailing stop limit order is designed to allow an investor to specify a limit on the maximum possible loss, without setting a limit on the maximum possible gain. These orders continuously recalculate the stop loss price at a fixed amount below the market price, based on the user-defined “trailing” amount. So as the stock price moves up, the stop loss price will also move up maintaining the user defined trailing amount. For example, Mr. X bought shares @ ₹100. He places a trailing stop loss order @ ₹90 with a trailing gap of ₹10. If the stock price goes up to ₹105, the stop loss price will also recalculate itself to ₹ 95 maintain the trailing gap. So if the price moves further up to ₹130, the stop loss price will become ₹120. But suppose the stock price starts falling to ₹125, the stop loss price will remain @ ₹120. The trailing stop loss orders will recalculate itself to maintain the trailing gap if the price moves in favour of the investor but will not recalculate in the event that the share price moves against the favour of the investor.

What is the effect of trailing stop loss order?

This order enables the investor to state the maximum possible loss without sacrificing the profits. Such orders help investors to lock in profits if the share price moves in their favour as the stop loss price will automatically recalculate to maintain the trailing gap amount.

What is GTD under validity?

GTD referes to ‘Good Till Day’. In the event that these orders do not get executed immediately, they remain pending until the end of the trading day. After which, the exchange cancels all the pending orders.

What is IOC under validity?

IOC is refered to ‘Immediate Or Cancel’. These orders get executed as soon as they are sent to the exchange, failing which they get cancelled. These orders do not remain pending in the system till a suitable match is found. In case, only a portion of the order is executed, the other portion gets cancelled automatically.

What is Disclosed Quantity order?

In normal orders, the entire order quantity is disclosed to the market. But an order with a disclosed quantity allows the investor to disclose only a part of the order to the market. For example, Mr. X wants to buy 100000 shares of a stock at the prevailing market price. If he does not want to disclose his order size to the market, he can set disclosed quantity to 1000. As soon as the his 1000 shares are executed, the next order will automatically be sent to the market. This process repeats until all he has purchased 100000 shares.

What are After market orders (AMO)?

After Market Orders (AMO) are placed in the system after the markets are closed for the day.

Do After Market Orders have to be limit orders?

Yes. After market orders have to be limit orders.

What are price bands?

The exchanges fix price bands for stocks within which the stock price can move in a day. For F&O stocks, the price band is 20%. This means that transactions can only take place within +20% and -20% with the previous day’s closing price taken as the base price for reference. However in case of few specific scrips, the exchange may fix price band of less than +/-20%. Any orders placed outside this band will get rejected by the exchange. Incase an investor specifically wants to place an order outside the price band, then he/she would be required to take permission from the exchange in order to do so.

What is the effect of Take profit and stop loss order?

The investor can specify his/her profit expectation as well as the maximum risk that he/she would be willing to incur in a single order.

What is take profit and stop loss order?

It is an order which enables the investor to place two orders simultaneously. 1) The price at which he/she would sell the investment to book profits, 2) The price at which he/she would sell the investment to reduce losses. For example, suppose MR.X has purchased shares @₹100. He would like to sell his shares if the stock went up to ₹110 (where he makes a profit of ₹10) or if the stock price went down to ₹98 (where he makes a loss of ₹2). Mr.X can place a take profit and stop loss order as follows: Take profit price = ₹110, Stop loss price = ₹98. If the stock went up to ₹110, then his shares will be sold and automatically the stop loss order will get cancelled. Similarly, if the stocl went down to ₹98, his shares will get sold and the take profit order will get cancelled.

What is the effect of stop loss trigger price?

Stop loss orders remain inactive until the last traded price reaches the stop loss price. During times of market volatility, the stop loss order may not get executed as price may move past the stop loss price very quickly. To avoid such a situation, the trigger price will allow the investor to activate the order even before the last traded price reaches the stop loss price.

What is the additional charge that the seller has to incur for short delivery?

The seller who fails to deliver the shares to the buyer will be debitted the difference between auction settlement price and the original price along with an auction penalty of .05% per day that the seller fails to deliver the shares. In case the transaction is closed out by the exchange, the seller is debited the difference between the close-out price and the original transaction price.

What is a market order?

A market order is an order to either buy or sell an investment at the best available price in the market at that particular moment in time.

What is the effect of a market order?

Market orders usually get executed immediately at the best prevailing prices in the market. The investor will not know the exact price at which the order will get executed while placing the order.

What is a limit order?

A limit order is an order to either buy or to sell a security at a specified price. The order will either get executed at the limit price or would not get executed at all.

What is the effect of a limit order?

Limit orders get executed only at the specified price and will remain pending until that price is reached. Sometimes, these orders may not get executed at all.

What is a stop loss order?

It is an order to exit an open position when it reaches a specified price. These orders are designed to limit the investor’s loss.

What is the effect of a stop loss order?

These orders can protect the investor against sudden movement in the security’s price.

What is stop loss trigger price?

Stop loss orders are designed in such a way that the order remains inactive until the last traded price reaches the limit order price. The stop loss trigger price enables the user to define at what price the stop loss order should get activated. Once the last traded price reaches the trigger price, the stop loss order is eligible to be executed on the exchange.

Can I link additional bank accounts to my trading account?

Yes, you can link additional bank accounts to your trading account for the benefit of fund transfer.

Can I give a cheque from a bank account which is not linked to my trading account?

No, cheques from unknown bank accounts will not be accepted.

Can I transfer funds through NEFT or RTGS from an account which is not linked to my trading account?

No, fund transfer can only be done from those bank accounts which are linked to your trading account.

Can I request for payout through cash or cheque?

No, fund withdrawal is only processed through bank transfer.

During fund withdrawal, can I choose which account the amount will get credited to?

No, fund withdrawals are credited only to the primary bank account.

What is the brokerage that I will be charged for Fyers Online Account?

Check our pricing page.

Will I get charged additional for placing orders over the phone?

No

Will I be charged AMC even if there are no transactions?

Yes, all account holders will be required to incur the AMC even if there are no transactions executed.

Are there any other charges while transacting?

Find our charges list. (Link to charges list pdf)

What is an auction?

An auction occurs when the seller of the shares has not made available the shares on the settlement day. To fulfil the obligation to the buyer of the shares, the exchange carries out an auction for the shares in the open market.

What is a Bull Spread?

If an option spread strategy is designed to be profitable when the price of the underlying security rises, it is known as a Bull Spread.

Is there a limit on my futures order size on NSE?

Yes, the futures order has two criteria that need to be met: 1) Price Limit – In case of stock futures, the price has to be within the range of +/-20% of the previous trading day’s closing price. In case of index futures, the price has to be within the range of +/- 10% of the previous day’s closing price. 2) The exchange constantly updates the quantity limit for futures. You can find the latest list here: www.nseindia.com/content/fo/qtyfreeze.xls It needs to be noted that the exchange may change these criterion based on volatility.

Do I get additional leverage for intraday futures positions?

Yes, we allow investors to take intraday futures positions with lesser margin requirements than carry forward futures transactions. But such positions will mandatorily squared off the same day itself.

How much additional leverage will I get for intraday futures positions? Is it the same for all stocks?

You can check the margin requirements in our margin calculator. No, the leverage provided is not the same across all the stocks.

Can I carry forward intraday futures positions?

Yes, but the investor will have to meet the additional margin requirement to carry forward the position.

Can I hold futures positions even after the expiry of the contract?

Yes, this is possible if the investor chooses to roll over his/her futures positions.

What do you mean by Rollover?

Rollover is a facility that enables the investor to carry forward his/her futures position beyond the expirty of the contract.

How does Rollover work?

Rollover is a two legged transaction. In the first leg, the investor needs to square off the near month position. In the second leg, he/she will have to take a fresh position in the same direction in either the next month or the far month contracts.

What is the cost of rolling over a position?

The investor will have to bear the difference in prices between the near month contract and the next/far month contract along with brokerage and transaction costs on both legs of the transaction.

What happens if the minimum margin amount is breached?

Minimum margin is the margin amount that the investor should have allocated towards the open positions. If the minimum margin level is breached, the system will automatically block further funds. Incase investor does not have sufficient funds in his/her account, the position will be squared off.

What happens if the margin requirement increases?

In the event that the margin requirement is increased, the investor will have to allocate additional funds towards the open position, failing which the position will be squared off.

Can the margin requirement change for the futures contract?

Yes. Margin requirement may change due to the increased volatility in the prices.

What is a Bear Spread?

If an option spread strategy is designed to be profitable when the price of the underlying security falls, it is known as a Bear Spread.

What is an Options Debit Spread?

A debit spread occurs when the investor buys options with a higher premium and sells options with a lower premium thereby resulting in a net premium outflow.

What is an Options Credit Spread?

A credit spread occurs when the investor buys options with a lower premium and sells options with a higher premium, thereby resulting in a net premium inflow.

What is futures contracts?

Futures contracts are standardized contracts made between two parties during a course of a transaction. These contracts enable the two parties to buy and sell a particular security at a certain price in the future.

How does futures trading work?

To buy or sell futures, the investor is required to place a certain percentage of the order value as margin. In futures trading, the investor uses leverage to buy or sell more of the security than what he/she could have taken in the regular cash market.

How is futures trading different from margin trading?

In a margin transaction, the positions are squared off the very same day whereas in futures trading, the positions can be held until the expiry of the contract. In an intraday margin transaction, the investor has the option of converting his position to delivery, provided he has sufficient cash/shares in his demat account (depending upon whether he has a buy position or a sell position). Whereas the investor has no such option in futures transaction since all futures contracts are cash settled.

Can I short sell futures contract without having the underlying shares in my demat account?

Yes. Since all derivate positions are settled in cash, the investor can short sell futures contracts without having the underlying shares in his/her demat account.

How much margin would be blocked for futures trading?

Margin requirement differs from one scrip to another.

What is a derivative?

A derivative is a mutual contract between two parties which derives its value from an underlying asset. These contracts are time bound contracts whose value changes in accordance to the value of the underlying asset.

What is an underlying? What is the difference between an underlying and a derivative contract?

An underlying is the asset upon which the contract is based upon. The underlying refers to the stock which is widely traded in the market. The stock may have several tradeable derivative contracts based upon different criterion. But all derivative contract values are dependent on the underlying i.e., the security itself.

Can I hold onto these contracts for as long as I want?

Derivative contracts are time bound contracts which are valid only for a certain period of time. These contracts expire on a monthly basis. Equity derivative contracts, currency derivative contracts and commodity currency contracts have their own expiry dates each month.

What happens to my margin if the stock moves against my favour?

The margin amount is blocked to safeguard against adverse price movement. However, the amount blocked as margin at the time of transaction would be slightly greater than the minimum stipulated margin requirement to undertake the transaction. This is to avoid from squaring off of the position in case of adverse price movements.

What happens in the event that the losses incurred are greater than the total margin blocked?

In the event that the losses are greater than the total margin blocked, then the position will be squared off by the broker to avoid further losses. The losses over and above the margin amount blocked will be debited from the account balance automatically.

What happens if the losses incurred are greater than the total funds in the account?

In such a situation, the client is obligated to clear the dues to the broker immediately. Failing which, the client will be charged a penalty.

Can I do anything to prevent my open positions from being squared off?

Yes. Since the square off process is triggered when the available margin is less than the required margin, providing additional margin will ensure that sufficient margins are available in case you face losses.

What is settlement cycle?

Settlement cycle refers to the period in which the buyer and seller of shares settle their obligation to each other. In india, we follow T+2 settlement cycle. So if the transaction takes place on Monday, the settlement will be done on the second trading day, which is Wednesday, if the transaction takes place on Tuesday, the settlement will take place on Thursday, so on and so forth.

What is T+2 settlement?

T referes to the day on which the transaction took place. This means that the buyer must pay the amount in full to the seller by the second trading day after the transaction and the seller must provide the shares to the buyer by the second trading day after the transaction.

What is rolling settlement?

In a rolling settlement, each trading day is considered as a trading period and trades executed during the day are settled based on the net obligations for the day. Trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd working day. For arriving at the settlement day all trading holidays are excluded.

What is trade for trade (T for T) segment?

Unlike in rolling settlement, scrips listed in Trade for Trade segment are settled on a trade for trade basis and no netting off of obligations is allowed. This means that scrips listed under this segment cannot be sold before they have been settled, which is on T+2.

What is margin amount?

Margin amount is the minimum percentage of the total transaction value which is required in order for the investor to take an intraday position.

How does convert to delivery impact my funds?

Once an investor chooses to convert a ‘BUY’ intraday position, 100% of the cash transaction value is blocked from his/her account. In case the investor chooses to convert a ‘SELL’ intraday position, then the funds blocked for the position will be released and the equivalent quantity of the transaction value is blocked in his/her demat account.

What is meant by convert to delivery?

Convert to delivery is an option for the investor to convert the intraday open position to a cash segment transaction. Once the investors chooses to convert his transaction to delivery, then he is obligated to make settlement for the transaction on T+2 day.

How long are contracts valid for?

Typically, derivative contracts are valid for three months.

What happens when my contract expires?

When the contract expires, all the outstanding positions in the derivative contract are closed and profit/losses are settled in cash.

How can I identify when my contract expires?

Typically, derivative contracts which expire in the current month of trading are called ‘Near’ month contracts, those which expire next month are called ‘Next’ month contracts and those which expire the month after next are called ‘Far’ month contracts.

Do all scrips have derivative contracts?

Not all scrips have derivative contracts under them. The National Stock Exchange (NSE) updates the list of securities that have derivative products from time to time. The exchanges consider only those stocks which meet the criteria of liquidity and volume.

What is Mark to Market (MTM)?

Mark to market is a process by which the profits and losses are continously calculated based on the current market prices of the security.

What is End of Day (EOD) MTM settlement?

It is mandatory for derivative positions to be settled in cash on a daily basis. At the end of each day, settlement of open derivative positions takes place at the exchange provided closing price. The difference between the opening price and the closing price is settled in cash (On the day of the transaction, the opening price is the acquisition price). In case of profit, the difference is added to the account of the investor and vice versa. Incase of loss, the difference is deducted from the account. The subsequent day’s opening price is the previous trading day’s closing and the process repeats at the end of the day.

What is margin trading?

In a normal transaction, to buy shares you need 100% of the value in cash and to sell shares you need 100% of the quantity available in your demat account. With margin trading, you use leverage on your available funds to buy/sell positions of larger value than what you could have taken in a normal transaction.

How is margin trading different from a cash segment transaction?

Transactions in cash segment are settled on T+2 basis. The buyer pays the seller in full for the shares that are purchased and the seller delivers all the shares to the buyer. In cash segment, the shares are delivered to the buyer by the seller. In intraday trading, the transaction will be squared off by you or it will be done automatically at the end of the day unless it is converted into delivery.

What is short delivery?

This refers to a situation wherein the seller of the shares does not make the shares available to the buyer on the settlement day. This results in the buyer not getting the shares credited to his demat account on the T+2nd day.