Frequently Asked Questions

There are 6 uTrade Originals strategies on uTrade which have been built by market experts for different market conditions.

• You can click on any to know more about the strategy and in which market conditions it performs well, the margin requirements etc.


• Subscribe to the strategy which fits with your view of the market and click on the deploy button.


• A dialogue box will appear containing the strategy’s parameters. After reading that carefully, you can click on proceed.


• Your required strategy is now deployed.

For custom strategies: The capital required to deploy a trading strategy can change depending on several factors, including the type of strategy, the markets being traded, the desired level of risk, and the individual trader's goals and preferences. There is no fixed amount of capital that applies to all trading strategies.

For uTrade Originals: you get to see exactly how much capital is required for each strategy. Currently you need a minimum capital of Rs.8,00,000 for a particular strategy. Please note that each strategy has its own capital requirement, which you can check by clicking on the strategy card.

While algo trading offers many benefits, it also presents some risks and challenges, including:

• Technical Failures


• Over-optimization


• Market Risks: Algorithms are subject to market risks and can incur losses if market conditions change rapidly or unexpectedly.


• Regulatory Risks: Algo trading is subject to regulations and compliance requirements that traders need to be aware of and adhere to.
• Lack of Human Judgment: Algorithms lack human judgment and may not account for certain qualitative factors or unexpected events that can impact markets.

Express speed - Algos have the ability to fire orders at 1/1000th of a second, way beyond the scope of manual trading.
Automate execution - Instead of monitoring your trades manually, feed parameters into the order form and let our powerful algo engine take care of the rest.
Become Disciplined and eliminate the emotional bias - Algos are void of emotions which works very well especially in the financial markets

Not convinced?
Blog - https://utradealgos.com/blog/ten-reasons-every-trader-should-get-their-hands-dirty-with-algorithms/
Video - https://youtu.be/pCYi_PS5IRY

There are various types of algorithms used in Algo Trading, including:

• Momentum-based algorithms
  
• Mean reversion algorithms
  
• Statistical arbitrage algorithms
  
• Market-making algorithms
  
• Volume-weighted average price (VWAP) algorithms
  
• Time-weighted average price (TWAP) algorithms
  

Margin Calls: When your account falls below the required margin level, Share India issues a margin call. A margin call typically requires you to deposit additional funds into your trading account to restore it to the required margin level. Failure to meet the margin call may result in further actions.

Liquidation of Positions: If you fail to meet the margin call, Share India has the right to liquidate your positions to cover the margin shortfall. This means your open positions can be forcibly closed, potentially resulting in losses.

Account Suspension: In some cases, if you consistently fail to meet margin requirements, Share India has all the rights to suspend or restrict your trading account. This is done to manage the risks associated with insufficient funds and protect both you and the broker.

Legal Consequences: Failure to meet margin obligations can lead to legal implications, depending on the jurisdiction and the terms and conditions agreed upon.

Cash or Cash Equivalent

SEBI allows investors to deposit margins in the form of Cash (by transferring money from investors’ bank account to Share India’s bank account) or Cash Equivalents (that includes such Sovereign Gold Bonds, Govt. Securities, Treasury Bills and Liquid Mutual Funds etc. which have been approved for the purpose by the Clearing Corporation).

A complete list of all the securities that are presently counted as Cash Equivalents is given in the enclosed file.

In order to receive margin benefit against cash equivalent securities purchased by the clients, clients shall be required to pledge such securities in Share India’s favor by following pledge/re-pledge mechanism. (Note: appropriate training may also be provided w.r.t. pledge/re-pledge mechanism, if required);

The margin benefit against such securities is passed on to the client after deduction of applicable haircut which is generally 10% in case of cash equivalent securities (e.g. against a cash securities’ value of say Rs. 1000/-, margin benefit of Rs. 900/- shall be passed on to the client, after completion of pledge process by the client);

Share India may help clients in buying Treasury Bills (T-bills). The detailed process for the same along with applicable terms and conditions are available at the link: ……………………

Share India may also help clients w.r.t. creation of FDRs against clients’ credit balance available with Share India, the interest for which shall be passed onto the clients after deduction of applicable TDS. The detailed process for the same along with applicable terms and conditions are available at the link: …………………… (Note: In case of FDRs, the clients shall be allowed to use the entire amount of his/her FDR/s for margin purposes);

Non-cash Securities

Besides Cash Equivalent Securities, the clients are permitted to also deposit approved non-cash securities purchased or owned by them towards their applicable margin requirements (Non-cash securities includes such Equity Shares, Bonds and Non-liquid Mutual Fund Units etc. which have been approved for the purpose by the Clearing Corporation);

A complete list of all the securities that are presently counted as approved non-cash securities is given in the enclosed file;

In order to receive margin benefit against cash equivalent securities purchased by the clients, clients shall be required to pledge such securities in Share India’s favor by following pledge/re-pledge mechanism;

The margin benefit against such securities is passed on to the client after deduction of applicable haircut as is mentioned against each security

Very Important: 50:50 rule

As per regulatory directives, the margin benefit available against non-cash securities cannot exceed total margin benefit available against Cash and Cash Equivalents.

Examples:

A. Total Cash and Cash Equivalents Rs. 100/-

Total haircut value of non-cash securities Rs. 80/-

Total margin available to client for trading purposes Rs. 180/- (Rs. 100/- + 80/-)

(In this case, client is eligible to receive full margin benefit of non- cash securities as higher margin benefit against cash and cash equivalents is available to him)

B. Total Cash and Cash Equivalents Rs. 100/-

Total haircut value of non-cash securities Rs. 150/-

Total margin available to client for trading purposes Rs. 200/- (Rs. 100/- + 100/-)

(In this case, client shall be eligible to receive margin benefit of Rs. 100/- only against non- cash securities as the margin benefit available to him against cash and cash equivalents is Rs. 100/- only)

C. Total Cash and Cash Equivalents Rs. 0/-

Total haircut value of non-cash securities Rs. 200/-

Total margin available to client for trading purposes Rs. 0/-

The price of options, also known as the option premium, is influenced by several key factors. These factors help determine the value of the options contract in the market. Here are the main factors that affect the price of options:

Underlying Asset Price: The current market price of the underlying asset has a significant impact on the option premium. For call options, as the underlying asset's price rises, the probability of the option being profitable increases, leading to a higher premium. Conversely, for put options, as the underlying asset's price falls, the probability of the option being profitable increases, resulting in a higher premium.

Strike Price: The strike price is the predetermined price at which the underlying asset can be bought or sold. The relationship between the strike price and the current market price of the underlying asset influences the option premium. In general, as the strike price gets closer to the current market price (for call options) or moves further away (for put options), the option premium tends to increase.

Time to Expiration: The amount of time remaining until the option's expiration date affects its premium. Generally, options with a longer time to expiration have a higher premium compared to options with less time remaining. This is because more time provides a greater opportunity for the option to become profitable. As the expiration date approaches, the option's premium may decrease due to time decay.

Volatility: Volatility refers to the degree of price fluctuations in the underlying asset. Higher volatility generally leads to higher option premiums because there is a greater likelihood of significant price movements, which can result in increased profitability for the option holder. Options on highly volatile assets tend to have higher premiums compared to options on less volatile assets.

Interest Rates: Interest rates can influence the pricing of options. Higher interest rates can lead to higher option premiums, especially for options with longer time to expiration. This is because the opportunity cost of tying up capital in the option increases with higher interest rates.

Dividends: If the underlying asset pays dividends, it can affect the price of options. For call options, dividends can reduce the option premium because the owner of the option does not receive the dividends. On the other hand, for put options, dividends can increase the option premium since the option holder benefits from the dividend payments.

In-the-Money (ITM): If the market price of the underlying asset is:

Net Options Premium refers to the total amount of premium received or paid for a combination of options positions. It represents the overall monetary value of options premiums associated with multiple options contracts in each strategy or portfolio.
To calculate the net options premium, follow these steps:

Mark-to-market (MTM) is an accounting process used to calculate the value of an asset or position based on its current market price. It is commonly used in trading and investing to determine the unrealized gains or losses on open positions. MTM calculations are commonly used in futures, options, and other derivative trading, where positions are marked to market regularly to reflect their current values. This process helps traders and investors understand their current profitability or potential risks associated with open positions.

The calculation of MTM involves the following steps:

Initial Position: When you open a position, its value is initially recorded based on the purchase price or the prevailing market price at the time of entry.

Market Price Update: As the market price of the asset or position changes, the MTM calculation reflects the updated value. This is typically done daily or as frequently as required.

Unrealized Gain or Loss: The difference between the initial value and the updated market value represents the unrealized gain or loss on the position. If the market value is higher than the initial value, it indicates an unrealized gain, while a lower market value indicates an unrealized loss.

Margin Adjustments: The MTM calculation also affects margin requirements. If there is a significant change in the market value and it impacts the margin requirement.

Account Balance Adjustments: The unrealized gains or losses from MTM are typically reflected in your trading account balance. Positive gains may increase the account balance, while losses may decrease it.

It's important to note that MTM reflects unrealized gains or losses, meaning they are not realized until the position is closed. Once the position is closed, the final realized gain or loss is determined.

Calmar Ratio → The Calmar ratio is a gauge of the performance of your strategy. It is a function of the fund's average compounded annual rate of return versus its maximum drawdown.

Statistically, Calmar Ratio = Net P&L/Max Drawdown

The higher the Calmar ratio the better with anything over 0.50 is considered to be good. A Calmar ratio of 3.0 to 5.0 is really good.

A Trailing stop loss order adjusts the stop price at a fixed percent or number of points below or above the market price of a stock. It is an advanced type of Stop Loss which along with a measure of Risk Management which limits losses, also adds the layer of Profit Protection. It does so by adjusting the ‘Trigger Price’ by moving it in tandem with stock price movement.

Refer to the examples below to understand better:

‘Sell’ Trailing SL:

Trigger Price moves up | Stock Price Moves up

Eg. if you buy XYZ Limited

Buy Price: 50Rs.

CMP : 55Rs.

SL: 48

Trailing SL = 1 TICK where 1 tick = .5Rs

Now,

MTM Profit = 55-50 → Rs. 5

Since Stock price moved up by 5Rs, Trigger price of ‘sell’ Trailing SL will also move up by 5 x 1 tick size = 5 x .5 → 2.5 Rs.

Therefore, the new Trigger Price = 57.5Rs.

Similarly,

‘Buy’ Trailing SL:

Trigger Price moves down when Stock Price Moves down.

• Bull/ Bear Call Spread
• Bull/ Bear Put Spread
• Straddle & Strangles
• Long/short Butterfly
• Iron Condor
• Straddle
• Strangle