Leverage is a double edged sword. And while it could enhance you profit if the stock moves as per your expectations, the losses could also mount pretty quickly if it moves in opposite direction. Just to explain, leverage means that if you have Rs 100 in your account, you can trade for upto Rs 1,000. For a beginner this seems to be a very good product but if you talk to experienced traders, they will advise you to stay away from this.
To show how losses could mount, if you have Rs 10,000 in your account and you take a position of Rs 100,000 and the stock move 3% against your position, you actually lose Rs 3,000 plus the brokerage. On a capital of Rs 10,000 that is a huge loss of 30% of capital in one trade.
Now that we have told you have leverage can create issue, we will talk about the brokers who provide high leverage when you trade with them.
Leverage on Delivery based trade
Not many brokers provide this as the risk in this case is carried on the next trading day and if something happens in the night, the broker could face a big loss.
SAMCO ( also now as ITL) give Leverage upto 4x based on the shares bought. In simple terms, you can now buy stocks of up to Rs. 4,00,000 with only Rs. 1,00,000 Cash available in account. You can add margins to your trading account and to avoid square-off of your trades in case of extreme volatility in the stock.
A charge of 0.05% per day shall be levied on the outstanding amount.
Angel also provide leverage of upto 4x for delivery based shares brought through them. They also charge a interest of 0.05% per day for the leveraged part.
Leverage on Intraday trades
Almost all the major broker provide leverage for intraday trades and it varies from anywhere from 4X upto 40X if you use stop loss while trading. This is comparatively safe trades for broker as they don’t have to keep the leverage on their books as the position are closed on the same day. Most of the broker square-off the position from 3:15 onwards.
Some of the brokers who provide high leverage for intraday trades are Zerodha and Upstox. Zerodha provides leverage of upto 14X for stocks if you don’t have a stop loss. In case you are using stop loss, the leverage provided could be upto 40X. Upstox also provide similar leverage of upto 25X.
You have to use BO/CO to get this high leverage.
Leverage on Future and options
Futures are already leveraged products and above that some brokers provide even higher leverage on them. Most of the brokers ask for Exposure margin and SPAN margin for taking positional trade in Futures. In case you are interested in taking intraday position, then you can use BO/CO and get much higher leverage.
You can also Pledge your shares with brokers to reduce the cash amount you need to keep. After a small haircut of 20%, you can use the rest of amount to provide margin funding for future trade.
In the end, I would just like to add that higher leverage should not be the only reason to choose a stock broker. You should try to find more about the service they provide.
To find out about the Top 10 stock broker in India, please read Top 10 stock broker in India.