In the context of a basket order, the required margin signifies the funds required to initiate the basket order. That will be blocked after all the orders are placed/executed.
Suppose you are a trader and want to place a basket order to buy a NIFTY option. The total value of the basket order is ₹1,50,000
Required Margin: Required margin is the amount required to place all the orders in the basket. Before placing the basket order, Upstox calculates that you need a required margin of ₹1,50,000 to initiate this trade. This means you must have at least ₹1,50,000 available in your account.
Final Margin: The final margin is the amount that will be blocked in the trading account after the order execution i.e. after considering the hedge benefit. Let's say the final margin for this specific basket order is ₹1,10,000. When the order is executed, Upstox "blocks" or sets aside ₹110,000 from your account. This ₹110,000 is temporarily unavailable for other trades or withdrawals while the basket order is active.
Here's how it works:
Before Placing the Order:
Account Balance: ₹150,000
Required Margin: ₹150,000
You have sufficient funds to meet the required margin, so you place the basket order.
After Placing and Executing the Order:
Account Balance: ₹150,000 (unchanged)
Final Margin Blocked: ₹110,000
Now, your account balance is still ₹150,000, but ₹110,000 of it is effectively reserved as the final margin for the ongoing basket order. This means you have ₹40,000 available for other trades or withdrawals while ensuring that you meet the requirements for the active basket order.