What is MTF?
MTF allows you to buy more stocks than your current balance allows by letting you borrow up to 80% of the stock’s value. You’ll pay a small daily interest of 0.0246% (that’s ₹24.6 for every ₹1 lakh borrowed per day).
For example:
If you have ₹25,000 in your account, you can borrow and buy stocks worth ₹1,25,000 using 5x leverage. Here’s how it works:
- Your borrowed amount: ₹1,00,000
- If the stock price increases by 2% in a day, you’ll earn ₹2,500 in profit.
- Subtract charges (interest + fees): ₹100.6
- Final profit: ₹2,400
Return on Investment (ROI): 9.6%.
Lemonn’s MTF charges are super competitive (8.99% P.A.) – lowest in the market!
How to Activate MTF
Activating MTF is quick and easy:
- Go to the home page and click the “Activate MTF” button.
- Once requested, it takes about a day to activate.
You can also activate it directly while viewing a specific stock by selecting “Activate MTF Now.”
How to Use MTF
Once enabled, using MTF is simple:
- Place an order like usual but choose the MTF option in the order window.
- You can hold your MTF position for as long as you like.
Important:
After placing an MTF order, you’ll get a pledge request email at 4:30 PM. Accept it by 7:00 PM the same day.
Why Use MTF?
1. More Buying Power, Bigger Gains
With MTF, you can invest more than what you currently have. For example, putting ₹20,000 and borrowing ₹80,000 allows you to invest ₹1,00,000. If the stock price goes up, your profits are based on ₹1,00,000, not just ₹20,000, giving you higher returns.
2. Be Careful with Risks
Leverage multiplies both profits and losses. If your stock loses value, losses will also be bigger, so it’s important to manage risks.
Things to Know
1. Daily Costs
Every day you hold a leveraged position, you’ll pay 0.0246% daily interest. Holding for too long can eat into your profits.
2. Adding Margin
If stock prices drop, you might need to add extra funds or sell the stock to avoid losses.
3. Why Lemonn Charges Interest
The interest helps cover the cost of funds Lemonn provides for leverage trading.
4. Other Charges
- Brokerage: ₹20 or 0.03% per order (whichever is lower).
- Pledge Charges: ₹20 + ₹12 (CDSL fees).
- Square-Off Fee: ₹20 per order (if Lemonn closes it for you).
MTF is a great tool for boosting your buying power and aiming for higher profits—but always remember to use it wisely!
Is MTF Risky?
The thumbrule in investing is higher the risk, higher the return. In MTF trades, you get to own stocks without having to fund it yourself completely. What’s more, as you are buying more shares, you stand to make higher profits if the stock price goes up. That said, leveraged trade is riskier than equity delivery trades. In MTF, there is a cost involved as you have to pay interest on each day you continue to hold the stock. Also, if the price of the stock falls, you will have to cough up additional margin money to remain in the MTF trade.
Advantages of MTF
Increased buying power: MTF allows you to buy more stocks than than you could with just your own funds.
Potential for higher returns: As you are buying more shares, if the stock price goes up, you stand to make higher profits.
Risks of MTF
Losses are magnified: If the stock price goes down, your losses are also bigger as you are using borrowed money.
Margin calls: If your stock value drops significantly, you may be asked to add more money to your account, failing which the broker can sell your stocks to recover the loan amount.
Conclusion
Leveraged trading is risky, but potential rewards can often outweigh risks. We have provided you the lowdown on margin trading, complete with its pros and cons. Consider your risk appetite and take an informed trading decision.
