What is a daily margin statement, and how to understand it?

What is a Daily Margin Statement?

Think of it as a snapshot of your trading account’s health. It tells you how much trading margin (like spending power) you have on a given day. The goal? To keep you in the loop, preventing surprises like penalties for not having enough margin.

Two Types of Margins

Stock Exchange Margins:

These are margin set by stock exchanges, to ensure trade settlement and manage risk.

Components include Mark to Market (MTM), Value at Risk (VaR), and Extreme Loss Margin (ELM).

If your margins are too low, you might not be allowed to trade or risk having your positions closed early.

Broker’s Margin:

Some brokers, like Tradejini, offer margin trading. They lend you money against your account’s value.

You pledge your stocks as collateral, and there’s a small interest fee.

It helps you make larger trades without draining your wallet.

Understanding Your Statement:

Segments:

EQ for stocks, FO for futures/options, and CDS for commodities.

Trade Date:

Shows when you made each trade.

Funds Available:

Total clear cash balance available in ledger.

Pledged Stocks Margin: 

Margin benifit received against pledging your stocks after appropritate hair-cut. 

Other Approved Margins:

80% early payin benefit received against security sold. 

Total Margin available:

Sum of funds plus pledge stock margin and other approved margin.

Total Up-front Margin:

In the case of the cash segment, upfront margin is 20% of the purchase or sale value. In the case of derivatives, it is determined by exchange span and exposure margin.

MTM Margin:

Mark-to-market loss requirements for both open and closed futures positions. 

Margin Required:

Total exchange margin required for your all open positions accross segments.

Delivery Margin:

In case of cash segment delivery margins collected towards scrip Adoc margin requirement. In case of derivatives exchanges begin requesting physical delivery margins four days prior to the expiry date, with the margin amount progressively increasing as the contract approaches its expiration. This margin is calculated as a percentage of the exchange risk margins, which include VaR (Value at Risk), ELM (Extreme Loss Margin), and Adhoc components.

Excess or Shortfall:

It shows any margin shortfall in your account. 

Margin Status:

If the balance is positive, there is no need to take any action. If it is negative, you need to transfer the funds immediately.

Penalty Charged:

In case of margins shortfall in your account.

Bottom Line:

Understanding your daily margin statement gives you complete details about avaiable funds and required margins to your trading account.