What is a margin account?

A margin account lets you trade with more exposure than the cash you deposit, because the broker allows part of the position to be funded by margin. In India, this mostly shows up as F&O margin and the Margin Trading Facility (MTF) for delivery buying.

In F&O, you deposit a margin (SPAN plus exposure) set by the exchange, instead of paying the full contract value. With MTF, the broker funds part of your stock purchase and charges interest on the borrowed amount. Say you buy shares worth ₹1,00,000 under MTF and pay ₹30,000 yourself; you pay interest daily on the remaining ₹70,000.

The catch is that losses are calculated on the full position, not your share of it. A 10% fall on that ₹1,00,000 holding is a ₹10,000 loss, which is a third of your ₹30,000 capital. If the price keeps falling, the broker asks for more money, and if you cannot pay, it sells your shares.

Note that SEBI proposed changes to the MTF framework in a June 2026 consultation, which are not final, so check the current rules with your broker. The safest habit is to treat margin as a risk tool, not free money.

Margin, exposure and position sizing are explained with worked examples in our Diploma in Stock Market.