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What is a Margin Calculator?
Knowing the margin is essential before engaging in F&O trading. A margin calculator helps you find just that. It is an online tool that helps you calculate the required margin for F&O trading.
The margin calculator can also be used to calculate the margin for option buying or option selling and for different F&O strategies when trading in equity, commodity, or forex.
Types of margins
There are different types of margins that the calculator calculates. These include the following:
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SPAN Margin
The SPAN margin is the most basic and primary in an F&O trade. SPAN stands for Standardized Portfolio Analysis of Risk. It measures the maximum loss that the portfolio can incur under different outcomes. The SPAN margin is revised six times a day, so the margin value changes depending on when you use the calculator. -
Exposure margin
The exposure margin is an additional margin collected to protect the broker's liability in an adverse market. -
Value at Rise (VaR) margin
The Value at Risk (VaR) margin measures the probability of a loss in an asset's value based on the statistical analysis of its historical price movements and volatility. -
Extreme Loss margin
The extreme loss margin is calculated to factor in the losses that might occur beyond the VaR margins. It is deemed to be the highest of the following two values: - 5% of the value of the asset's position.
- 1.5 times the standard deviation of the daily logarithmic returns of the asset's price over the last six months.
How to use a margin calculator?
The margin calculator calculates and shows different margins based on your inputs. To use the calculator, enter the following details:
- Select Exchange: NFO, CDS, NCX or NCDEX
- Select Product Type: Futures or Options
- Select Symbol: This is a variable field depending on your choice of contract (e.g.: NIFTY, BANKNIFTY or any stock)
- Select Net Quantity: Input the net quantity you want to trade for.
- Choose Between Buy or Sell
Based on these inputs, the combined margin requirement of the SPAN margin and exposure margin will be shown. You will also be able to check out the individual margin values.
So, when trading in futures and options, know the margin requirements for a hassle-free trade. Use the margin calculator for a quick and accurate assessment of margins required, fulfil the requirement and trade easily.
Margin Calculator FAQs
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.
What is the 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 the basis of the assumption that you will hold the position till the expiry date.
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.
How to use a margin calculator in Angel One?
Angel One margin calculator lets you calculate margin requirements 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 SPAN margin requirement and how is it 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 conditions. 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 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.
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 the market value of the far month contract.
