Are you one of those traders who want to know what is MTM in Upstox? If yes, then this post will help you to understand MTM. Along with this, you will get help for doing margin trading in Upstox. Most people consider Upstox as one of the leading discount brokers. Therefore, it becomes essential to understand MTM.
What is MTM?
MTM refers to the Mark to Market. It is a technique of measuring the standard value of the fluctuating assets and liabilities in the share market. Generally, it determines the margin between book value and market value of the assets. When you are trading or investing for securities, including mutual funds and F&O stocks, it helps analyze the current market value of these securities.
MTM or mark to Market calculates daily to understand whether there is sufficient margin or need to bring up more. The terms can be negative and positive; the positive term denotes the rise in the price of the security, and the negative term reflects a fall in the security pricing. The goal of MTM is to maintain the level of margin at a sufficient level and minimize the risk associated with the trading.
Now let’s understand what MTM is in Upstox!
What is MTM in Upstox?
MTM in Upstox or Mark to Market in Upstox compares the actual market value and a book value of the security to calculate MTM margin. It calculates MTM regularly to measure trading risk; however, the absolute margin call works only if your account’s balance goes below the SPAN. Here SPAN means Standard Portfolio Analysis Of Risk level. If this level crossing, then automatically, a margin call applies by notifying the negative amount in the account.
How Can You Determine MTM on Cash Position?
Many traders also face problems in determining MTM on cash position, and it is also essential to learn about it. Here are some essential steps which you can follow to determine MTM on cash position for the securities
Step 1: Check out the cash balance available in your account for the security you are dealing with in the stock market.
Step 2: Find the MTM margin for the particular security.
Step 3: Now, you have to multiply cash balance with MTM margin to analyze MTM on the cash position
Step 4: If your securities value is less after trading than the cash position, then a negative sign will appear, and Upstox will start giving warnings to you.
Step 5: It gives a warning sign on every 10% loss on MTM; therefore, when your loss reaches 80%, you must add more balance.
This concept will get cleared with the mentioned example, so have a look at this as well.
Example for MTM on Cash Position
So, let’s start understanding examples for more clarity about MTM on cash position with a simple and detailed approach.
Let’s say we are trading with F&O stock and have an Rs30,000 balance in the account. Since we get margins to compare the stock’s fair value, we will check the margin.
Suppose we have a 5x Margin on F&O stocks, and that provides the total exposure of 5*30,000 = Rs1,50,000, available for intraday. On the same day, we purchased 150 shares of Tata at Rs1000 each.
That cost Rs1,50,000 and sold those on the same day for Rs900 each. Here we faced an Rs100 loss on each sale with a total of Rs 15000.
So, while comparing the actual cash position, we will find 30000-15000 =15000, which reflects we have a 50% loss, and at this level, we will start getting warning calls from Upstox.
What is MTM Square Percentage in Upstox?
MTM square percentage is also an important term to know as a trader. It is the position that takes place when the MTM breach percentage hits the 80% level. The MTM square-off percentage is determined by the Risk Management Team of Upstox (RMS) for the MTM losses.
The RMS team of Upstox can square off the client’s position if their invested securities MTM % or Level breaches from 50 to 80 percent.
However, they have a bit different treatment for the priority pack clients. They have a fixed cut-off for these clients at 70%, which is applicable on securities and commodities on which they are dealing.
How Much Margin Do You Get in Upstox?
Most of you may want to know about Upstox’s Margin, so here you can get a brief introduction for the same.
Upstox’s Margin On Equities: Upstox provides a 25x margin on every NSE and BSE security listed on the stock market. It also gives a 2% margin on the equities that are not on the list but have a 20% circuit limit breaker, but it does not give any exposure.
Upstox’s Margin On Options: Upstox must have the total premium amount and provide a 5x margin on the available selling options.
Upstox’s Margin On Mcx Goods: If you are trading with MCX Futures, you will get a 3x margin on selling and buying.
Upstox’s Margin on NSE and Currency Futures: If you are trading on these securities, you can get up to 20% of the span with exposure amount. If you want to continue trading on such securities, you can require a 100% applicable margin.
In this post, you understand MTM refers to the Mark to market that is used as a technique to understand the standard value of the securities you are dealing with, and it is calculated daily. If you are looking for MTM benefits on a margin trading facility. Then you should know Upstox does not provide this facility. Also, if the shares prices increase, you do not get leverage or margin, and if you face MTM loss, you may have to add an amount.
So, I hope you have understood MTM and its several essential terminologies. If you face any doubts about this topic, then you can comment down below. And you can also share this essential post with your friends who want to become stock traders or investors in the future.