Optimizing the Use of Cash Component at FYERS

How can you optimize the use of the cash component or cash equivalent at FYERS?

Understanding how to optimally utilise the cash component or cash equivalent can significantly enhance your trading strategies. To help you grasp its utility, we've illustrated its application across four different scenarios:

Scenario 1: Pure Cash with No Pledging

You possess ₹1,50,000 in your trading account, employed primarily for derivatives trading. It's imperative to note that these funds remain largely unutilised except during active trading sessions. In this scenario, with no securities pledged, you access the lowest tradable margin.

Scenario 2: Mixed Holdings with SEBI Regulation

With ₹1,50,000 in hand, ₹1,00,000 is channelled into equities, leaving ₹50,000 as liquid cash. Upon pledging these equities, you procure a collateral margin of ₹80,000 (post a 20% haircut). This grants you a total tradable margin of ₹1,30,000. But, according to SEBI regulations, it's mandatory to sustain a 50-50 distribution between cash margins and collateral margins. Therefore, any order surpassing ₹1,00,000 will face rejection as the cash margin would be insufficient. However, this arrangement allows you to gain from capital appreciation and other corporate actions related to your equity investments.

Scenario 3: Equities and G-Secs as Collaterals

Diversifying, you allocate 50% of your funds to equities and the remaining to G-Secs. By pledging, you obtain ₹60,000 from equity and ₹67,500 from G-Secs as collateral. This gives a cumulative tradable margin of ₹1,27,500. Since both cash and non-cash components are used as collaterals, there's no obligation to maintain cash margins. This facilitates seamless trading in the derivatives segment. Additionally, you stand to profit from equity-based capital appreciation and a lucrative interest from G-Secs, averaging around 7-8% annually.

Scenario 4: Exclusive G-Sec Investments

You invest ₹1,40,000 of your ₹1,50,000 capital in G-Secs. Pledging these, you garner 90% of the invested value, approximately ₹1,26,000 (after a 5% haircut). This leaves you with a tradable margin of ₹1,36,000. As the sole collateral is the cash component, it's recognised as liquid cash. Consequently, you can employ the entire margin for F&O trading and simultaneously enjoy the interest generated from your G-Sec investments.

By being informed and strategic in the deployment of your funds and understanding the nuances of the cash component, you can maximise the efficiency and profitability of your trading activities on the FYERS platform.