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Use Of Margin Calculator For Futures And Option

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By Author: Maithili Pawar
Total Articles: 30
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The definition of margin is one of the critical items to consider when investing in futures and options. You need to deposit what is called an initial margin with the broker before you start trading in F&O. The goal is to cover the broker if the buyer or seller causes losses due to market fluctuations when dealing with futures and options.

You will trade on multiples of the deposited initial margin. For instance, if you want to invest INR 10 lakh in futures and options, you will need to deposit INR 1 lakh with the broker, if the margin is 10 per cent.
This multiple you are dealing in is called leverage.

Margins, of course, vary from index to index, and from share to share. So, to find out the margin for trading in the stock or F&O index you like, you need a margin calculator.

SPAN Margin calculator
It is essential to know the types of margins, including SPAN before using F&O margin calculator. Span is short on Standardized Risk Analysis Portfolio. To calculate margins, a SPAN margin calculator uses complex algorithms.

The SPAN calculator reaches the initial margin equal to the highest loss a portfolio would suffer under several (around 16) scenarios. SPAN margins are revised six times a day, so different results will be given by the calculator depending on the time of day.

To understand it better you should know what is future and option trading

If there is one thing about finance and commodity markets that is certain, it's price changes. Prices constantly change. In response to various factors, they may go up and down, inclusive of the state of the economy, environment, agricultural production, election results, coups, wars, and government policies.

Of course, those who trade in those markets will be worried about price volatility, because price shifts can mean losses – or income. They go for derivatives like futures and options to protect themselves.

A derivative is a contract that derives its value from the underlying assets; it may include securities, goods, currency, etc.

What are futures?
The futures contract is one kind of derivative. A buyer (or seller) agrees, in this form of contract, to buy (or sell) a certain quantity of a commodity at a specified rate at a future date. Futures are essential to help avoid the danger of fluctuating costs.

What are options?
The options contract is another kind of derivative. This is a bit different from a futures contract in that it gives a buyer and the seller the right, but not the obligation, to buy (or sell) a particular asset at a specific predetermined date at a certain price.


Maithili Pawar is a financial expert with 5-plus years of experience in investment banking. In her free time, she writes on trading topics. In this, she has explained everything about margin calculator and explained its uses in F&O

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