MTF Calculator

Example of Margin Trading Facility

Let’s say you want to buy a company's stock trading at ₹100 per share. To buy 100 shares outright, you'd typically need ₹10,000 (₹100/share * 100 shares). However, Margin Trading Facility (MTF) allows you to take this trade even if you don't have the full amount upfront.

For example:

You have ₹2,000 available for investment, and you are getting upto 5x leverage on the stock on Neo. This means that you can take 4 times the initial trade value. Meaning that you put in ₹2,000 and we put in ₹8,000 for a trade value of ₹10,000.

So now, you can purchase your 100 shares of the same company at ₹100 per share, where you provide ₹2,000 and we provide the remaining ₹8,000 needed to complete the purchase.

Now, suppose the share price increases to ₹125 each. This means the total value of your 100 shares has risen to ₹12,500 (₹125/share * 100 shares). By selling your shares at this point, you'd earn a profit of ₹2,500 (₹12,500 - ₹10,000).

Here's the thing about MTF: You were able to profit at ₹2,500 on your initial investment of just ₹2,000!

However, it's important to remember that you have to pay a nominal interest fee to your broker for lending you ₹8,000. This fee will be deducted from your ₹2,500 profit. With Pay later (MTF) you can maximise your return on investment.

Now, let’s see a negative scenario when the share price falls. In the same example, let’s say that the share price drops to Rs. 75 which brings your value of shares down to Rs. 7,500 from the initial 10,000. In this case, you might face margin shortfall requirements and your total loss stands at Rs. 2,500 (Rs. 10,000 – Rs. 7,500) outside of the interest you were charged on the borrowed amount.