Daily Margin Statement – How to Read it

A daily margin statement is a vital part of market trading that all people who invest in stocks must know to read. This statement overviews your margin account, providing crucial financial details. Entering the stock market without knowing your daily margin statements can be harmful. Therefore, this article will discuss what it is, how it contributes to successful investing, the statement's main components, and how to read a daily margin statement. 

What is a Daily Margin Statement?

A daily margin statement details the trading margin rates available in your account on a given trading day. Through margin trading, investors can borrow money to buy resources and increase the possible return on their investment. Your broker shares this statement with you to inform you of the status of your margins while you are trading in stocks. The main aim of this statement is to help you avoid margin shortages and fines for failing to maintain sufficient margins. It contains details on blocked margins (for held/ taken positions) and deposited margins, such as money transfers and collateral pledges. It also gives you a quick overview of your deposits, the amount you used for open positions and the available funds for new trades. There are two types of margin-related parts in a daily margin statement. The first is the commission collected by stock exchanges for each deal they make—their margin. The other is the margin rate provided by your broker against the stocks you pledged in case you lack funds to cover the deal value.

Importance of a Daily Margin Statement: 

A daily margin statement is of utmost importance while managing trading risks. Some of its uses are listed below: 

• Can prevent margin calls when movements in the market cause the value account to drop below a predetermined level. 
• Helps make sound trading decisions by relaying the free margin available, planning and reducing the chances of running out of available funds while making transactions.
• Helps monitor the margin rate to avoid crossing the broker's limits and facing penalties.
• Helps identify unfavourable circumstances and prevent them with reason.

How to Read a Daily Margin Statement

Investors should take into consideration several aspects while reading the daily margin statement. These factors are listed below: 

• Overview of the Account: Overviewing an account refers to reviewing the account numbers, account summaries, trading dates, equity, broker details, margin levels, and current balances associated with the account. When the margin level of the account dips below a particular mark, a margin call may be initiated
• Track Segment: Always keep track of the segments you have traded in, including cash, currency, commodities, equities, and derivatives. 
• Check Margin Requirement: Always check your margin requirement since it displays the amount needed to exchange each open position you own. It includes the Extreme Loss Margin (ELM), Value at Risk (VaR) margin, and Mark Market Margin (MTM).
• Margin Calls: Always check the notifications of margin calls to take care of things immediately and keep your positions secure.
• Positions in Securities: Go through the list of securities you own and record the number and market value. To assess performance, compare this to your initial investment.
• Consolidated Crystallized Obligation: All option premiums are payable in the relevant segment, as are any mark-to-market (MTM) losses.
• Penalty Charged: It is important to check the specifics of the penalty assessed for margin deficiencies.
• Check Available Margin: Always check your available margin by subtracting the used margin from your initial margin. You can use this available margin for new trades.
• Margin acquired: Always check how much margin your stockbroker has acquired for a specific trade.
• Transactions: Verify the accuracy of your transaction history by carefully reviewing it and comparing it to your trading activity. Pay attention to any extra expenses or discrepancies.
• Margin and Cash Balances: Verify your cash and any money you may have borrowed on margin. It is essential to understand these balances to manage risk and make sound decisions.
• Delivery Margin: Check the amount of margin that the exchange charges you for keeping In-The-Money options until they expire.
• Margin Availed By Pledging Stocks: This section details the margin you obtained by pledging stocks you own with your stockbroker.          

Conclusion

A daily margin statement gives a thorough overview of your margin account and helps you manage risk and avoid margin calls. Investors can manage the complexity of margin trading by paying attention to available margins, required margins, and transaction history.