How is the cut-off value calculated?
The Cut-off value at any given point of time is calculated as Margin Available (Cash & FNO) for cash segment * and 75%# of margin utilized for all your open MIS positions.
*Margin Available (Cash & FNO) for cash segment = Cash + Stock as Margin – Net Realized Loss – Net Unrealised Loss – Margin Utilized Across All Products + Option Premium Received – Option Premium Paid – any other debt obligation.
Following is the formula for deriving the Cut-Off value:-
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Factor 1: Margin Available (Cash & FNO) for cash segment
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Factor 2: + 75%# of Margin Utilized for MIS position
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Factor 3: + Unrealised loss of all open position
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Factor 4: + Realized profit of MIS position (after netting off any realized loss in Non MIS position) up to the extent of unrealised loss in MIS position
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Factor 5: - MTM (Mark-To-Market) loss of non MIS position if it is greater than utilization of all non-MIS positions.
How it works: -
Let us understand through the following examples:- Total margin available before creating any position is Rs. 1,65,000
Factor 1: -
Margin utilized for non-MIS position Rs. 40,000
Factor 2: -
Margin utilized for MIS position is Rs. 25,000
Thus, the balance margin amount now stands at Rs. 1,00,000
As of this point, the cut off value will be as follows:-
Margin available = Rs. 1,00,000
+75% of margin utilized for MIS position = Rs. 18,750
Cut off Value = Rs. 1,18,750
Now let us, take into consideration the third factor combining the first two factors:
Factor 3:
+Unrealised loss of all open position
In this example, let’s assume that the client has unrealised loss of Rs. 3,000 in any of the open position, then the cut off value will be calculated as follows:-
Margin available (Rs. 1,00,000 – Rs. 3,000) = Rs. 97,000
+75% of margin utilized for MIS position = Rs. 18,750
+Unrealised loss on all open positions = Rs. 3,000
Cut off Value = Rs. 1,18,750
Now let us, take into consideration the fourth factor combining the first two factors:
Factor 4:
+Realized profit of MIS position (after netting off any realized loss in Non-MIS position) up to the extent of unrealised loss in MIS position
In this example, let’s assume the client has a realized profit on MIS position of Rs. 1,200 & realized loss in Non MIS position of Rs. 200 thus after deducting realized loss in Non-MIS position the net realized profit in MIS position is of Rs. 1,000 and the unrealised loss in MIS position is of Rs. 700, then the cut off value will be calculated as follows:-
Margin available = Rs. 1,00,000 (1,00,000 + (1,200 - 200 – 700 or 0 whichever is lower) as the realized profit benefit cannot be given due to new regulations)
+75% of margin utilized for MIS position = Rs. 18,750
+Realized profit of MIS position (after netting off any realized loss in Non MIS position) up to the extent of unrealised loss in MIS position = Rs. 700
Cut off Value = Rs. 1,19,450
Now let us, take into consideration the fifth factor combining the first two factors:
Factor 5: -
MTM loss of non MIS position if it is greater than utilization of all non MIS position
In this example, let’s assume that the client has utilized Rs. 40,000 as margin for non-MIS position and MTM (unrealised loss) on Non MIS position stands at Rs. 41,000. Now, as the MTM is higher than the margin money utilized for the non-MIS position by Rs. 1,000, the same will be deducted while calculating the cut-off value as follows:-
Margin available = (Rs. 1,00,000 – Rs. 41,000) = Rs. 59,000
+75% of margin utilized for MIS position = Rs. 18,750
+Unrealised loss of all open position = Rs. 41,000 -MTM loss of non-MIS position if it is greater that utilization of all non-MIS position = Rs. 1,000
Cut off Value = Rs. 1,17,750
# subject to change without prior notice
However, you do not worry about such detailed calculations. We have simplified the same and you can easily access your real-time Cut-Off value, including unrealised profit & loss on open positions in the Today’s positions section under the Reports Menu.