How is the Mark-to-Market (MTM) coverage calculated?

MTM coverage is a key risk measure used in margin trading. It indicates the percentage of margin cover available against the funded amount.
 

Formula:

Example Calculation:

  • Suppose a trader has ₹25,000 in their account.
     
  • They buy stocks worth ₹1,00,000 using 4X Leverage (meaning ₹75,000 is funded by Lakshmishree).
     
  • If the stock value falls to ₹93,000, the calculation will be:

Since the MTM coverage has dropped Below 20%, the trader's position will be Squared Off by RMS to prevent further risk.
 

To avoid liquidation, traders should:

  • Keep additional margin funds available.
     
  • Track market movements regularly.
     
  • Close risky positions before reaching critical MTM levels.