May 21, 2024
If you're following multiple trade calls from different groups, knowing how much to invest can be crucial.
Our approach helps you understand the minimum investment needed to follow these calls effectively.
Let's dive into how we calculate this for you.
Understanding Trade Calls
Trade calls are recommendations to buy or sell specific financial instruments, like stocks, indices, options, or futures. Each call belongs to a category, such as Index Options Buy or Stock Buy.
To help you follow these calls, we calculate the minimum investment required.
Step-by-Step Calculation
Collecting Trade Call Data
We start by collecting data on the trade calls you receive each day. For instance, on Day 1, you might get 20 trade calls.
Calculating Average Active Calls and Total Calls
Next, we determine the average number of active calls at any time and the total number of calls each day. For example, on Day 1, you have 3 active calls at a time and 20 total calls. On Day 2, if there are 25 calls, we update the averages to reflect this new data.
Categorizing Trade Calls
We then divide the calls into categories such as Index Options Buy, Stock Buy, etc. This helps us understand the investment required for each category.
Determining Investment for Each Category
For Stocks and Options Buy: We invest up to ₹20,000.
For Futures and Options Sell: We maintain a margin of ₹150,000.
Calculating Average Margin Required
We calculate the average margin required to execute all calls in a day. This involves multiplying the average active calls by the average margin for each category and summing them up.
Adding a Buffer
To ensure we cover unexpected market movements, we add a 25% buffer to the calculated margin. This gives us the minimum investment required.
Example Calculation
Let's take an example where we receive 20 trade calls in a day, divided as follows:
5 Stock Buy/Sell calls, each requiring ₹20,000.
3 Index Futures Buy/Sell calls, each requiring ₹150,000.
Step-by-Step Calculation
Total investment for Stock Buy/Sell: 5 × ₹20,000 = ₹100,000
Total margin for Index Futures Buy/Sell: 3 × ₹150,000= ₹450,000
Total margin required: ₹100,000 + ₹450,000 = ₹550,000
Adding a 25% buffer: ₹550,000 × 1.25 = ₹687,500
So, the minimum investment required for this example is ₹687,500.
Conclusion
By calculating the minimum investment for each group, we help you manage your capital more effectively and maximize your returns. This step-by-step approach ensures you have enough investment to follow trade calls from various categories.