Market Guide

The Definition of “Margin Call”

In future and options trade, if the price of the stock that is already held by the investors decreases, then the brokers will ask the investors to pay the margin money which is called a margin call.  It may sometimes also be called as fed call or maintenance call.

Explains “Margin Call”     SpeculationArbitrage

For instance, consider margin of a lot be 30,000 in nifty future. You bought the lot when nifty future is 6000. Suppose if nifty future decreases to 5900 then your loss will be 5000 (nifty lot size is 50 so 50*100 = 5000). Your actual margin amount will be 30,000 and 5000 has been diminished from that. Here broker will ask to pay the diminished amount immediately. In F&O margin call is very important.

What is Margin Account?

In stock market to purchase the stock brokers will lend credit to the investors and the account which holds these money’s is known as margin account. If the price of the stocks decreases, then the broker will ask the investors to the deficient amount else the broker will sell the stocks and manage these deficient amounts. For high volumes, many brokers will lend more credit to the investors. As there is a huge risk involved in these investors have to handle this very carefully.

Definition of “Market Arbitrage”?

Using the price difference trading the same stock in different stock markets and gaining profit is known as market arbitrage.

Explains “Market Arbitrage”?

Arbitragers sell the stocks in the market when the price of the stock is high and at the same time buy those stocks in another market if the price of the stock is low. For example, consider an arbitrager holds 1000 ITC stocks. And assume the price of the ITC share is trading at 350 in NSE and 347 in BSE then; the arbitrageur will sell their 1000 stocks in the NSE which is 350 and buy those 1000 ITC stocks in BSE which is 347 and gaining 3000 rupees. For doing the arbitrage your brokerage commission should be very low and this has no risk. Arbitrage will provide less profit.

What is Session Price?

The price of the stock during the time it got traded in the market is known as session price. Commonly when a stock is trading you will able to know different positions like open, high, low and close. Session price will help to take support and resistance position while trading. As session indicates a particular time period there may be an open session price, range of session price and session price is very volatile.

What is Sell Signal?

The market may be affected due to some happenings or some incidents and during that time the investors will sell their stocks called sell signal. Analysts and investors who know the stock market quite well use some technical analysis or with the help of the chart will be able to know the position of the market and immediately sell their stocks.  During this time choose a company that has a strong base and buy those shares which they provide in at the discount price which help to gain profit when the market is moving up.

Updated: March 31, 2015 — 12:16 pm
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