What is the Initial Margin and why is it required?
- Initial Margin is the amount which is required to maintain or hold your futures position in the account.
- Initial Margin is blocked at the time of initiating a futures position in the account.
- Initial Margin is made up of span margin & exposure margin.
- As long as you hold futures position in the account Initial Margin will be blocked.
- Initial Margin is certain percentage of the contract value.
- Initial Margin updates on a daily basis.
M2M(Mark to market)
- It is the process of calculation of daily profit and loss accounting in the futures position.
- M2M will be calculated on daily basis on closing price of futures contract you hold in the account, and profit and loss in the account will be decided accordingly.
- Whatever MTM(Mark to market) loss you incurred for the day will be deducted from the Initial Margin.
What if there is loss in the trading account?
- If there is a loss in your future’s position, and your loss falls below designated percentage of Initial Margin, then a notification will be sent to the user to deposit the required funds, so that the account can be restored to its original margin level by the end of the day.
What happens if the amount is not deposited?
- If the user fails to deposit the required margin, then Upstox will close out the market position of the trader on the next trading day.
- Additionally, if the MTM level breaches 50-80% of the Cash margins, the risk team will close out the entire positions with/without notifying the clients.