In our Index Future Based Trend Following Strategy, we are using the Nifty 50 index future. And we are using 3x leverage for the same.
Illustration: -
- Assume that the current Nifty 50 level is 12000
- The Nifty 50 future lot size is 75
- The notional value of one lot is 12000*75=900000
- We are using 3x leverage so the overall cash requirement is 300000
- The margin amount of one lot is 18% of the notional value. That convert into 900000*18%=150000
- Here we are going to use LIQUIDBEES to fulfill these margin requirements
- To implement this system, we need 300000 to the trading account
- Out of which we will buy 200000 worth of LIQUIDBEES (200 units of LIQUIDBEES)
- Now we will pledge these 200 units of liquidness. So that broker will give us a margin of 184000 (LIQUIDBEES considered as a cash equivalent so we are getting 92% as margin money)
- Our account 100000 still in the cash, which we will use it for the MTM requirement
- For the pledged LIQIDBEES we are getting interest on it
- We will get around 5% annually on the LIQUIDBEES that converts into 10000 (200000*5%)
- We are getting an additional 10000/300000=3.33% return on our portfolio by using LIQUIDBEES
- In case if we lose more than 1 lakh cash for MTM loss then we need to unpledged some units of the LIQUIDBEES so that we will have cash in the account
How to
buy LIQUIDBEES: -
- Always put limit order while buying LIQUIDBEES
- Put a limit of 1000 for each LIQUIDBEES and wait for it to fulfill
- The same is true while selling also. Put a limit order of 1000 while selling also
- You will get interest as an additional LIQUIDBEES units in your account at the end of each month
- Even though if you have partial units of LIQUIDBEES, you can redeem it to the AMC directly
