Intraday trading (also called MIS: Margin Intraday Squareoff) means you buy and sell the same stock within the same trading session. You don't take delivery—the position must close by 3:20 PM (NSE auto-squares off at 3:20–3:30 PM).
WHY this exists: You're speculating on price movement, not investing. Since you're not holding overnight, brokers historically allowed high leverage (you could control ₹1,00,000 worth of stock with ₹10,000 margin).
HOW it works now (post-2021 rules):
Your broker must collect minimum margin upfront (typically 8–25% of trade value for cash equity, varies by stock volatility) and maintain it continuously
If you buy ₹1,00,000 of Reliance intraday, you need the full VaR+ELM margin in your account before placing the order
If you don't square off by 3:20 PM, broker auto-exits your position (often at unfavorable prices during volatility)
Pre-2021, brokers checked margins only at end of day. Traders exploited this by:
Buying ₹10L stock at 9:30 AM with ₹1L capital
Selling at 10:00 AM, using that ₹10L to buy ₹20L of another stock
Repeating (pyramid leverage) throughout the day
Peak margin rules ended this by requiring margin to be collected upfront and monitored through random snapshots during the day, penalizing any shortfall.
Why "peak"? Because it's the maximum margin you needed at any sampled moment—not the average, not the closing value. If you briefly held a huge position, that peak defines your requirement.
HOW the penalty works (simple daily rate, NOT annualized):
Penalty=Shortfall×Penalty Rate×Days Short
Where Penalty Rate = 0.5% per day (short collection / short reporting) or 1.0% per day (non-collection or shortfall persisting > 3 days).
The statutory SEBI rule is simple: you must pay the full 100% of the purchase obligation by T+1 settlement. There is no SEBI mandate that a buyer deposits "20% on T and the rest by T+1."
On trade day (T): To place the order, the exchange still requires you to have upfront margin (VaR + ELM) blocked. Additionally, individual brokers often block ~20% as their own internal risk control—but that 20% is a broker practice, not a SEBI statutory requirement.
WHY upfront margin exists: If you buy ₹1L of stock on Monday but don't pay by Tuesday, the broker must fulfill the obligation. The upfront margin is the "good faith" cushion mandated by the exchange.
| Aspect | Intraday (MIS) | Delivery (CNC/NRML) |
|--------|---------------------|
| Position Duration | Must close same day | Held overnight, days, years |
| Margin Requirement | 8–25% of trade value (VaR+ELM) | Upfront margin on T; 100% by T+1 (statutory) |
| Leverage | ~2.5×–5× | Effectively 1× (must pay full) |
| Auto Square-off | Yes, at 3:20 PM | No |
| Peak Margin Applies? | Yes, random snapshots | Upfront margin required to place order |
Recall Explain to a 12-Year-Old
Imagine you want to borrow your friend's expensive cricket bat to play a match. Your friend says, "Okay, but leave ₹500 with me as security—if you break it, I'll use that money to fix it."
Intraday trading is like borrowing the bat for just today's match—you must return it by evening. Your friend only needs ₹100 security because you're not keeping it long (less risk of damage).
Delivery trading is like buying the bat to keep forever. You need to pay the full price (not just security money) by the next day.
The "peak margin rules" are like your friend checking your pocket at surprise random moments during the day—not at fixed times you can plan around. Before 2021, your friend only checked at the end of the day, so some kids borrowed 10 bats with just ₹100 total. Now, at any random moment, your friend can say: "Show me the money right now!" So you'd better keep the full security in your pocket the whole time. That's peak margin.
What is the key difference between intraday and delivery trading in terms of position duration?
Intraday positions must be closed within the same trading session (by 3:20 PM), while delivery positions are held overnight and settled on T+1.
How does the exchange enforce peak margin, and was it fully implemented?
Margin must be collected upfront and maintained; the exchange takes random snapshots during trading hours (derivatives: several random few-minute snapshots) and the highest requirement across them is your peak margin. It is NOT four fixed hourly checkpoints. Fully implemented September 2021.
How is VaR (Value at Risk) margin calculated for a stock?
VaR margin = Price × Z-score × Daily Standard Deviation. For 99% confidence, Z-score = 2.33. Example: If σ_daily = 3%, VaR ≈ Price × 2.33 × 0.03 ≈ 7% of stock price. Cash-segment VaR typically lands in the 8–25% band.
If you buy ₹2,00,000 worth of stock intraday with 25% margin requirement, how much capital do you need?
₹50,000. (₹2,00,000 × 0.25 = ₹50,000). This gives you 4× effective leverage.
What is the penalty for a ₹20,000 margin shortfall for one day?
₹100. The penalty is 0.5% of the shortfall PER DAY (simple, not annualized): ₹20,000 × 0.005 × 1 = ₹100. It rises to 1% per day if the shortfall persists beyond 3 days.
In delivery trading, what does SEBI actually mandate for buyer payment?
The buyer must pay 100% of the purchase obligation by T+1. There is NO SEBI rule requiring "20% on T, balance by T+1"; the 20% block some brokers apply is their own internal risk control.
Why was the peak margin rule introduced by SEBI?
To eliminate intraday leverage pyramiding where traders reused freed capital from squared-off positions to take repeated leveraged positions in a day, creating systemic risk from inadequate capital.
What is the penalty rate for short collection vs. non-collection of margins?
Short collection (some but insufficient margin): 0.5% of shortfall per day. Non-collection / shortfall persisting beyond 3 days: 1.0% per day. Both are simple daily rates.
Dekho beta, is note ka core idea bahut simple hai — pehle Indian market mein log bina paisa hue bhi bade-bade positions le lete the, jaise ₹1 lakh capital pe ₹10-20 lakh ka trade. Ye leverage ka khel tha. Problem ye thi ki agar market ulta ghoom jaaye to trader default kar jaata aur poore system ko risk hota. Isliye SEBI ne peak margin rules laaye — matlab ab tumhe trade karne se pehle actually apne account mein paisa dikhana padega. Aur exchange din mein random snapshots leta hai check karne ke liye ki tumhare paas margin sach mein hai ya nahi. Ye ekdum "bank mein paisa nahi to cheque mat likho" wala funda hai.
Ab intraday trading ka matlab samjho — MIS mein tum same stock same din buy aur sell karte ho, delivery nahi lete. Position 3:20 PM tak band karni hi padti hai, warna broker khud square-off kar deta hai (aksar bure price pe). Kyunki tum overnight hold nahi kar rahe, isliye leverage milta tha, par ab margin continuously maintain karna padta hai. Margin nikalne ka formula seedha hai: Trade Value × VaR Margin × Multiplier. VaR yaani Value-at-Risk woh maximum 1-din ka loss hai jo 99% confidence pe ho sakta hai — jitna volatile stock, utna zyada VaR margin. Example mein dekha TCS ka ₹3.5 lakh trade pe 10% VaR aur 1.5x multiplier lagne se ₹52,500 chahiye — matlab lagbhag 6.7x leverage.
Ye topic tumhare liye important kyun hai? Kyunki agar tum kabhi real trading karoge, to ye rules tumhare capital ki suraksha karte hain aur tumhe over-leverage hone se bachate hain. Bahut se naye traders yahi galti karte hain ki bina margin samjhe bade positions le lete hain aur phir auto square-off ya penalty mein phas jaate hain. Toh intraday aur peak margin ka concept clear rakhoge, to tum apna risk properly calculate kar paoge aur unnecessary losses se bach jaoge. Simple baat — pehle paisa, phir position!
