Why was the position squared off after the pledged holdings were sold?
As per regulations, effective from October 7, 2024, 100% of the proceeds from selling holdings will be credited to the trading account and made available on the same day for all trades, including stocks and F&O positions.
Previously, only 80% of proceeds were available for further trades on the same day, with the remaining 20% available the next day. For example, selling shares worth ₹1,00,000 would provide ₹80,000 to be used on the same day and the remaining ₹20,000 the following day. Now, the entire ₹1,00,000 can be used to place trades on the same day.
If the client is selling the quantities of a pledged stock for collateral margin, the collateral margin reduces to the extent of the shares sold. If the clients do not have additional funds in the Zerodha account to maintain the minimum required margin, the positions will be squared off.
Example Scenario
- A client has 1 lakh worth of TCS shares pledged and received a collateral margin of ₹87000 after the haircut of 13%
- The client took a position using the collateral margin with no cash balance in the Zerodha account.
- Now, the client sells all the shares of TCS and gets ₹80000 (80% of 1 lakh) credit from the sale of those shares. There will be a shortfall of ₹7000 which will reflect as a negative margin on the Funds page. To learn more, see Why is full credit not being received against the sell value of the holdings?
- As the client has no cash balance, such a position will be squared off by Zerodha if the funds are not added to the Zerodha account.
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