What Are MTF Stocks and How Do They Work?
What Are MTF Stocks and How Do They Work?
Blog Article
mtf stocks refer to stocks that investors can buy using borrowed funds from their broker. This facility allows traders to increase their purchasing power without having to fund the full value of the transaction upfront. Instead, they deposit a margin—usually a percentage of the total trade value—and the broker finances the rest.
How MTF Works:
Open a Margin Account: Investors must have an activated MTF account with their stockbroker.
Select Eligible Stocks: Only certain stocks approved by SEBI and the broker fall under the MTF stock list.
Deposit Margin Money: The investor pays a part of the trade value (e.g., 25%), and the broker finances the remaining.
Interest on Borrowed Amount: The broker charges interest daily on the borrowed amount until the position is squared off or the loan is repaid.
Settlement Period: Positions can typically be held longer than in intraday trading but are subject to margin maintenance and periodic reviews.
Example:
If an MTF stock costs ₹1,00,000 and the margin requirement is 25%, you pay ₹25,000, and the broker lends you ₹75,000 to buy the stock.
This leveraged strategy can magnify both gains and losses, so it's crucial to monitor the portfolio closely and use an MTF calculator to understand costs.
Report this page