Traders allow clients to take extra exposure

MUMBAI: Speculators are trying to make their money go farther by asking brokers to use the margin money they deposit for one futures contract for buying a couple more.

Though such leveraging is riskier for clients, brokers are not willing to say no as it adds to their turnover. When a commodity moves up and down several times during a trading session it provides investors with opportunities to buy low and sell high or sell high and book profit when the price falls.

Such trades, called intraday leverage in industry parlance, can multiply gains or losses and are executed several times during a trading session. The margin in a broker's settlement account with an exchange is used for such purposes.

But a broker ensures he does not lose money by cutting a client's position the moment a loss amounts to a certain value of the client's margin during the trading session, so there is no carry forward of such positions to the next day.

While a broker gives a client extra exposure based on funds available in his settlement account, the client pays brokerage on the extra positions. This helps brokerages earn more commission and at the same time post higher trading volumes, which reduces their transaction charges on exchanges.

Brokers say such intraday trades are executed across commodities on domestic commodity exchanges. These are commodity futures exchanges with robust risk management systems that offer trading in farm and non-farm commodities. "More people in search of ways to make quick money are asking brokers for extra exposure, said Harish Galipelli, of JRG Wealth Management.