What does MTM in Upstox mean? Is this specific to a stock broker or used in general. I heard of this terminology, can someone explain this with a good example?
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- Updated On:17-Mar-2024
- Replies:7
Short Answer
MTM in Upstox refers to "mark to market" and is used to determine the margin between the market value and the book value of an asset. It records the value of an account with respect to the change that takes place in its assets and liabilities due to price fluctuation in the market.
Detailed Answer
MTM helps in measuring the fair value of a commodity and is mostly used while trading F&O stocks and Mutual Funds.
MTM is calculated on the basis of Negative and positive. A rise in the price of security means positive MTM and a fall in price indicates negative MTM. It is debited and credited from your account accordingly. The goal is to keep a sufficient margin while trading. It helps in minimizing the trading risk and is calculated on a daily basis.
There is a standard risk level maintained termed as SPAN (standard portfolio analysis of risk). If this level is crossed, a margin call is made by Upstox to the trader notifying about the negative balance in the account.
How to calculate MTM on Cash position?
To calculate the MTM on cash position, take the following steps:
Step1: Note the cash available.
Step2: Find out the margin for the product you're dealing with
Step3: Multiply the cash with the margin available.
Step4: If the value after trading is less than the cash position, it is a negative sign and a warning call is made by Upstox to the trader.
Step5: These warning calls are made on every 10% MTM loss. When it reached 80% the client is forced to put in more money.
MTM on Cash Position Example Explained:
Let's look at an example:
Suppose you have 20000 cash and dealing with F&O stock. In Futures trading, Upstox provides a 5x margin.
So, (20,000 x 5) =1,00,000. Thus the total exposure is Rs. 1 lakh for intraday.
On that trading day, you bought 100 shares of Tata at Rs.1000 and later sold the same at Rs.900
(100 shares x -Rs.100)=10,000. It shows that you incurred a loss of Rs.10,000.
So, comparing with the actual cash position, 20,000-10,000=10,000 i.e 50% less.
You will receive a warning call from Upstox in this case.
How much margin does Upstox provide?
A brief description of Upstox margins in different financial products:
Equity: There is a 25x margin provided on all NSE and BSE securities that are listed on the NSE-FO market. The margin exposure for securities not on this list but has a 20% circuit limit breaker, a 2x margin is provided by Upstox. apart from this, no exposure is given to any securities.
NSE and Currency Futures: Trading in futures is allowed for up to 20% of the applicable span plus exposure amount. If you wish to carry it forward, you would require 100% of the applicable margin.
Options: Full premium amount is required by Upstox for buying and a 5x margin is given for selling options. Comprehensive margin records are available on the broker's dropbox account.
MCX commodity: For trading is MCX futures, a 3x margin is provided by Upstox for both buying and selling.
Note: No such leverage or margin facility is available for MTF (margin traded facility) shares. However, the client needs to submit a margin if any MTM loss is incurred on the MTF shares.
In Upstox, MTM is computed using the current MV as per the Trading Day. One can go through his MTM summary to understand the computational method and determine whether it is profit or loss. In the report you will see that all the information is sorted first by asset and then by currency.
At the bottom of the report you will find the total Profit/Loss for each asset class and currency in totality. The logic in MTM is simple. If it is +ve that means you have profits and -ve means losses. Once you analyze a report you will easily understand the concept in Upstox.
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Discussion (9)
are you sure that you didn't already buy an option ?
After what happen you pay 73k or 17k..same problem hear
MTM- Mark to Market compares a management's actual valuation to its market value. When dealing commodities or Futures & Options, it is a significant unit. It was estimated in both positively and negatively. A positive MTM is when the value of a commodity rises, while a negative MTM is when the price goes down. To be specific- MTM= Real Value- Book Value.
Need More clarification with example
Mark to Market or MTM is an important denomination while trading in derivatives or Futures & Options. Here, MTM denotes the overall Profit or loss, a particular position is making in real-time. A positive MTM denotes a Profit in the position and a Negative MTM denotes a Loss in the respective positions.
The difference between the actual value to the book value of your securities is determined through MTM. It's quite a proper terminology given that you can easily find the difference in profits or losses in your investments in the F&O segment.
MTM is Mark to Market, commonly used in recording the value of assets according to its current market price. It is mainly used in F& O and you can measure a security's real market value. Also, Real Value - Book Value = MTM Margin I hope I am correct in explaining this in brief.
Mark To Market is a way to measure the market value of a security as compared to what is its value in the books. So it basically reflects the value of an account when the value of your assets and liabilities changes with time.
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sathi reddy
I trade in upstox options,but it in hold,that time I loaded 17k,and next day it shows in my 73k loss