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Using a margin calculator

One of the crucial things to understand while trading in futures and options is the concept of a margin. Before you start trading in F&O, you need to deposit what is called an initial margin with the broker. The aim is to protect the broker if the buyer or seller makes losses while trading in futures and options due to price volatility.

You can trade in multiples of the initial margin deposited. For example, if the margin is 10 percent, and you want to invest Rs 10 lakh in futures and options, you will need to deposit Rs 1 lakh with the broker. This multiple that you trade in is called leverage.

Of course, margins differ from index to index and share to share. So, you need an F&O calculator to figure out the margin to trade in the equity or index F&O that you want.

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Combined Margin Output
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Quantity: -
Span Margin: -
Exposure Margin: -
Additional Exposure Margin: -
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SPAN Margin calculator

Before using F&O margin calculator, it’s essential to know the types of margins like SPAN. SPAN is short for Standardized Portfolio Analysis of Risk. A SPAN margin calculator uses complex algorithms to determine margins. The SPAN margin calculator arrives at the initial margin equal to the highest loss a portfolio would suffer under several scenarios (around 16). SPAN margins are revised six times a day, so the calculator will give different results depending on the time of day.

Value at Risk margin

The NSE F&O margin calculator includes the value at Risk (VaR) margin. It estimates the probability of loss of value of an asset based on the statistical analysis of historical price trends and volatility. Margins will depend on whether securities are listed by Group I, Group II or III. There is also an Index VaR for the various indices.

Extreme Loss Margin

Then there is Extreme Loss Margin (ELM), which is higher of the two: five percent or 1.5 times the standard deviation of daily logarithmic returns of the security price in the last six months. It is calculated at the end of each month by taking the rolling data of the past six months. The result is applicable for the next month.

Angel One Margin Exposure

So, how much leverage exposure can you receive with Angel One margin facility? Leverage exposure is determined based on asset and trade type. It is usually a multiple of margin deposit. Say, for example, you can receive upto 48 times exposure in Equity and F&O segment on your margin amount.

One more point, from July 2018, SEBI has made it mandatory for all investors to block sufficient margin amount (SPAN+ Exposure) before placing an order. Failing to meet the threshold will attract a margin penalty.

Who collects SPAN and exposure margin?

The broker collects both SPAN and exposure margin upfront to allow users to take a position in the futures and options market. The margin provides a cover against the potential risk of adverse price movement.

SPAN is Standard Portfolio Analysis of Risk is the minimum margin requisite calculated basis risk and volatility of the underlying has derived its name from the software used to evaluate it.

On top of the SPAN margin, the broker would also collect an exposure margin, an additional cushion, to protect the broker’s liability against wild price swings. The total margin is the sum of SPAN and exposure margin.

How can SPAN margins be paid?

The SPAN margin is a percentage of the total contract value. For instance, if the contract value is Rs 6,000,00 and the SPAN is 3 percent, then the trader needs to pay Rs 18,000.

SEBI needs brokers to collect margin upfront before traders can take a position in the market. Failing to comply with the new norms would attract a margin penalty.

What is exposure margin?

Exposure margin and SPAN margin are the two components of total margin.

Exposure margin is an ad-hoc amount over and above SPAN, collected at the discretion of the broker as protection against broker’s liability that may arise from erratic market swings.

What is the spread benefit?

In the stock market parlance, spread refers to the difference between the lowest ask price and the highest bid price.

The spread contract allows investors the benefit of entering two calendar contracts simultaneously without the risk of partial execution at lower impact cost.

FAQs - Frequently Asked Questions

What is a margin for F&O?

Margin is the amount payable to take a position in the derivative market. Whether you are trying to buy or sell, the broker will collect the margin upfront as a cushion to cover for the risk caused by market volatility.
The margin collected at the beginning of the trade is called initial margin, calculated on basis of the assumption that you will hold the position till the expiry date.

What is the SPAN margin requirement and how it is measured?

Before you take a position in F&O trade, you need to assess the SPAN margin requirement, which is equivalent to the maximum loss amount you can suffer under different market condition. The process of determining the SPAN margin involves complex calculation and takes into consideration various parameters.
- Underlying risk
- Historical volatility of the underlier

What is the calendar spread margin for F&O?

Spead refers to simultaneously purchasing a futures contract expiring on a particular date and selling another futures contract with a different expiry date. Since it involves multiple transactions, the formula to calculate margin on calendar spread is the following.

Total margin = SPAN Margin + Calendar spread charge+ Exposure margin

The margin is calculated on the delta of the spread. In a calendar spread, the margin value equates the one-third of the mark to market value of the far month contract.

How is the margin calculated?

To calculate the total margin, you need to compute SPAN margin and exposure margin separately. It is a complex calculation, but now you can calculate your margin requirement easily by using an online margin calculator. These calculators use a simple algorithm and compute the final result based on user input.

What is a margin calculator?

An online margin calculator is a simple computation tool that helps you calculate the margin requirement on F&O trade easily. These calculators depend on user input to determine the outcome.

How to use a margin calculator in Angel One?

Angel One margin calculator lets you calculate margin requirement upfront. You need to input data like Exchange, Product, Quantity, and Buy/Sell to calculate the result. It is a simple tool and doesn’t require technical expertise to use.

What is the margin requirement to transact in the cash market?

From September 2020, SEBI has changed the margin requirement for trading in the cash market. For intraday trading also traders now have to deposit 20 percent of the transaction volume with the broker to avail margin facility.
You can pledge existing securities in your DEMAT account as collateral. Ask your broker for a complete updated list of investment instruments that you can use as collateral.

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