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In India derivative stock/index trading is done on cash. Frankly its foolish. Do you know future and option shorting can be done free of cost? By free of cost I do not mean that you do not need cash to trade futures and option selling – you need. But you can easily use this money to buy quality stocks and keep in your demat account and ask for collateral margin from your broker and trade futures and options with that money without bringing extra money in your trading account.
What Is Collateral Margin?
In technical terms is it should be called Margin on Collateral. Basically the invested stock is used as a collateral (asset) to give margin (loan) to trade to the owner of the collateral.
What is collateral?
Collateral is a property or other asset (here other asset is stocks in holding), that a borrower offers as a way for a lender (the broker) to secure the loan (margin). Suppose you lose money more than the collateral amount given to you by the broker then the broker has every right to sell your shares and recover the loss. Since collateral offers some security to the broker they allow a loan to their customers to trade derivatives. These collateral comes at a lower interest than normal personal loans.
Please note that for Group A stocks (large caps) most brokers give 80% collateral margin. It can go down for volatile stocks. Please consult your broker for collateral margin rules. Every broker has different collateral margin rules. Since the rules are different for every stock broker I cannot write a defined rule here. Only thing I can say is that some brokers charge a fees for collateral margin money. Make sure to know all terms and conditions before asking for collateral margin.
However most brokers do not charge any fees if you use only 50% of the collateral margin – anything above that is considered as a loan and charged a small fee. So its better you read the full terms and conditions before asking for collateral margin.
One good stock (Disclaimer: This is not a recommendation to buy or sell. Please do your own research before investing in this stock) is HDFC Bank. It is a fundamentally strong company unlikely to fail. This is one stock that you can keep for life.
These kinds of stocks are called All Weather Stocks. Whatever happens to stock markets these stocks will keep giving good returns over the long term. These kind of stocks come under the Warren Buffett style of investing. He has once said in an interview that – “Our favorite holding period is forever.” This what you should do with a few stocks.
You must stay invested in good stocks until you retire, ask collateral margin on them and trade options conservatively with proper hedge so that you keep making monthly income that comes for free apart from the dividends you get from these quality stocks.
Frankly I have summed up how you should invest and trade and make good money in small steps, accumulate them by the time you retire or in 10 years time in stock markets. Then either leave your job or do whatever you want. Rest is plain noise that’s going on about stock markets in media – Television and Online world. Unfortunately people follow the myth about the stock markets told in golden words and get trapped to lose money.
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What you should do now1. If you have still not subscribed for my free 5 days course you can do by filling the form above. You will learn a lot about option trading.
2. If you are a new option trader, not much experienced and are making losses you can do my paid course. I recommend Nifty Conservative Option Course for beginners because it is easy to understand and easy to trade. Even a 18 year old young trader or a housewife can learn it and start trading from next day. It will help you to earn consistent monthly income without any software or speculation or stress or big risk. You will learn proper hedging strategies that works in any market condition.
3. If you are banknifty weekly options trader you can do my Bank Nifty Weekly Options & Futures Strategy Course. You will learn future and option hedging strategies that works in volatile market condition.
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Here is complete process of my course1. Once you pay I will send you the course materials for studying to your email.
2. You read and ask me questions via phone/whatsapp/email to clear doubts.
3. Then you start paper trading and still can ask me questions.
4. After about one month you can start trading.
5. Since doubts can come anytime the support will be there for one year.
Within one month you can start trading on your own. No need to depend on anyone once you are on your own.
If you have any question you can contact me.
You can read about me here and my trading mistakes here.
Dilip Shaw, Founder
INCOME DISCLAIMER: Any references in this site of income made by the traders are given to me by them either through Email or WhatsApp as a Thank You message. However every trade depends on the trader and his level of risk taking capability, knowledge and experience. Moreover stock market investments and trading are subject to market risks. Therefore there is no guarantee that everyone will achieve the same or similar results. My aim is to make you a better & disciplined trader with the stock trading and investing education and strategies you get from this website. Please note that I DO NOT give tips or advisory services by SMS, Email, or WhatsApp or any other form of social media. I strictly adhere to laws of my country. I only offer education on finance, investments on stock markets in the best possible way as much as I can through this website. Still, you must consult an authorized advisor or do thorough research before investing in any stock or derivative before trading any strategy given in this website. I am not responsible for any investment decision you take after reading any article given in this website. Knowledge is the only way to get success in stock markets. I try my best to give stock market investing and trading knowledge through the articles posted in this website. Thanks for visiting my website.