m.Stock Pledge Shares: Leverage your portfolio to trade bigger

Published on Thursday, November 28, 2024 by Chittorgarh.com Team

With m.Stock Pledge Shares, traders can unlock the value of their existing stock portfolio by offering it as collateral in exchange for a margin that can be used for new trades. This innovative feature allows users to make larger trades by leveraging their portfolios without selling their shares.

The Pledge Shares facility on m.Stock enables users to exchange their existing stock portfolio for collateral margin. This margin can then be used to enter new positions in the stock market.

mStock Pledge Shares Facility Explained

Suppose you own shares of a company, say 100 shares of Reliance, lying in your demat account. Instead of selling them to get cash for further trades, you can "pledge" them with m.Stock. By pledging these shares, you get a collateral margin that you can use for various types of trades.

For example, if you pledge your Reliance shares, m.Stock provides a certain amount of margin in return, depending on the value of the shares. You can then use that margin to place larger trades in other stocks without having to sell your Reliance shares.

Users can pledge stocks from their Demat holdings to receive a collateral margin with the Pledge Shares facility. This margin can be used for various trading purposes such as:

• Intraday trades
• Futures and Options (F&O), particularly for selling or writing options
• Delivery trades via Pay Later (MTF)

One major advantage is that m.Stock does not charge any interest on intraday trades conducted using collateral margin from Pledge Shares facility.

Key Benefits of the m.Stock Pledge Shares Offering

1. Up to 80% Funding: Pledge your shares and receive up to 80% of their value as trading margin, allowing you to boost your trading capacity significantly.
2. Unlimited Holding Period: Margins obtained through the pledge facility can be held unlimitedly, giving traders flexibility in managing their positions.
3. Broad Stock Coverage: The facility allows the pledging of over 550 plus approved stocks, offering a wide variety of options for traders to enhance their portfolio's value.
4. Buy with Zero Cash Balance: This feature empowers investors to buy stocks even at zero cash balances.
5. Sell Pledged Shares anytime.
6. Margin for More than 550 stocks.

How to avail pledge shares?

The process to pledge shares with m.Stock is simple and can be done online via the trading platform. Here's how:

1. Go to the "Products" section in the menu and choose "Pledge Shares".
2. Select the stocks you wish to pledge from your Demat holdings.
3. Enter the quantity and confirm by clicking on "Pledge".
4. Validate the transaction through an OTP on the CDSL page.
5. The margin from pledged shares will be added to your available trading balance on the next trading day.
6. Investors can access the Pledge/Unpledged report in the Reports tab from the Menu.

How to un-pledge your stocks?

1. Login to your Mobile App or Website
2. Click on the “Funds” Section
3. Under the Funds section, Click on the” Pledge Shares” button
4. Click on the Pledge Now button
5. Then Click on Unpledge
6. List of Pledged stocks will appear
7. Click on the checkbox to Unpledge the stock
8. Enter the Unpledge quantity
9. Click on the “Upledge” Button

Points to remember while unpledging your shares

• A sufficient Balance should be there to cover the total value of unpledged shares.
• Add funds in case of insufficient balance, else unpledge request would be rejected.

How pledge shares and pay later (MTF) work together?

The Pledge Shares facility can work alongside Pay Later (MTF) to maximize your trading capacity. Here’s how:

1. You can pledge shares from your portfolio to generate margin for F&O or intraday trades.
2. Simultaneously, you can use Pay Later (MTF) to take delivery positions with just a 20% margin, even if you don’t have the full capital to fund the trade.

By combining these two features, you can trade more effectively, even with minimal upfront capital, and take advantage of market opportunities without selling your existing portfolio. Read m.Stock Pay Later (MTF).

1. Pledge Shares for Options Selling & Futures Trades

   Using m.Stock’s Pledge Shares facility for options selling and futures trading allows traders to meet their margin requirements by leveraging their existing portfolio.

   When you trade in Futures & Options, you need to provide 50% cash margin (money in your account) and the remaining 50% can come from pledging your shares.

   Key Points and Terms:

   • Zero Interest: No interest is charged on up to 50% of the margin provided via pledged shares. (If you have sufficient cash and margin from pledged shares, no interest is charged).
   • Interest on Shortfall: If there’s a shortfall beyond 50%, interest of 033% per day (or approximately 11.99% annually) is applicable. (If there's a shortfall, interest may apply based on the situation, but it’s capped at reasonable rates ranging from 11.99% to 18% annually for any margin shortfalls).
   • Cash Margin Requirement: At least 50% of the margin required for F&O trades must be in cash.
   • Margin: The money or value required to place a trade, especially in F&O. You can think of margin as a "down payment" for making trades.
   • Shortfall: If the money you have or the margin from your pledged shares is less than the amount required for trading, you have a shortfall.
   • Extra Margin: If you have more than enough money or margin from your pledged shares for the trade, you have an extra margin.

   Let’s understand how this works with various scenarios:

   Scenario 1: You Have Sufficient Margin

   • Margin Required: Rs 2,00,000
   • Available Cash Margin: Rs 1,00,000
   • Margin from Pledged Shares: Rs 1,00,000

   In this scenario, you have the full margin needed for the trade, with half in cash and half from pledged shares. Since there's no shortage, no interest is charged.

   Scenario 2: You Have Extra Pledged Margin but Less Cash

   • Margin Required: Rs 2,00,000
   • Available Cash Margin: Rs 90,000
   • Margin from Pledged Shares: Rs 1,30,000

   In this case, you are short by Rs 10,000 in cash, but you have an extra margin from your pledged shares. You can cover the Rs 10,000 shortfall using the extra margin from your pledged shares. However, m.Stock will charge you 11.99% interest per year on the Rs 10,000 shortfall.

   Scenario 3: You Have No Extra Margin Available

   • Margin Required: Rs 2,00,000
   • Available Cash Margin: Rs 1,00,000
   • Margin from Pledged Shares: Rs 1,00,000

   Here, everything seems fine, but after placing the order, there’s a shortfall of Rs 20,000. This means you don’t have enough margin to cover the trade. m.Stock will lend you this Rs 20,000, but they will charge 18% interest per year (called Delayed Payment Charges, or DPC) on this shortfall.

   Interest Calculation Summary:

   • Zero Interest: No interest is charged if 50% of the required margin is in cash and the other 50% is covered by pledged shares.
   • 99% Interest: Charged on any margin shortfall that’s covered using extra pledged shares.
   • 18% Interest: Charged if m.Stock has to lend you the money for the shortfall after the trade (Delayed Payment Charges).

   These scenarios show how the m.Stock Pledge Shares facility can be a powerful tool for traders to optimise their cash flow and manage margin requirements for F&O trades while minimising interest costs when used effectively

2. Trade with Rs 0 cash in the Delivery segment

   Yes, use the margin received as part of Pledge Shares to place Pay Later (MTF) orders and benefit from an unlimited holding period. Find out how you can trade with virtually no cash.

   Example:

   • Let’s say you hold a portfolio worth Rs 16 lakh, with stocks like HDFC Bank Ltd.
   • By pledging these shares, you can unlock up to Rs 12.80 lakh (with a 20% haircut).
   • You can use this margin to buy other shares under the Pay Later (MTF) facility and enjoy an unlimited holding period.
   • This approach enables you to trade with practically zero cash upfront in the delivery segment.

Pledge & Unpledge Request Timings

Pledge and unpledged requests can be placed from Morning 9 AM to 10 PM.