The margin calculator in simple terms can be considered as the online tool that will allow people to calculate compliance span margin requirements for the option of writing or shorting and for multi-leg F&O strategies. This is very much important for the people to be utilized at the time of trading into commodities, currency, F&O, and before taking a trade. The total margin includes two main components which are explained as follows:
- The span margin: This is the minimum margin that has to be mandated by the exchange and it has been calculated with the help of different kinds of modeling risk scenarios and risk arrays. The client will be required to adhere to this as decided by the exchanges and the amount will always be determined by taking into consideration a specific set of algorithms. These kinds of algorithms will understand the need for margin amount depending upon the total portfolio assessment of the one-day risk for the account of the trader.
- The exposure margin: This particular margin will be in addition to the span to cover the broker risk and this has also been calculated after paying proper consideration to different kinds of specific calculations.
Following are some of the very basic steps to be taken into consideration at the time of calculating the margin for utilizing the margin calculator:
1. First of all the individuals need to select the exchange on which they are interested to trade so that they can choose the right kind of types.
2. Then the individuals are required to choose the product type in the form of futures or options and then they have to select the ticker symbol of the scrip which they want to trade.
3. After this people have to select the type of trade in the form put or call so that the right kinds of decisions are always made by them.
4. Then the people are required to select the expiry date of the trade
5. After this people need to choose the strike price in the cases of options and then they are required to enter the lot size of the trade.
6. After this people can very easily calculate the SPAN margin
The margin will always be calculated with the help of software which is termed as SPAN that is the acronym for standard portfolio analysis of risk. This is based upon a sophisticated set of algorithms that are very much successful in terms of estimating the margin of every derivative position to its worst possible one-day move. Hence, depending upon the companies like 5paisa in the industry is a great idea for the people because this company offers 10 X margins on intraday option writing on expiry and 5X on the normal days which is a very good amount to be taken into consideration by the people. For delivery contract, the leverage has to be given by the span plus exposure as mandated by the exchanges in the best what is that companies very much compliant with all the rules and regulations and always make sure that every investor can avail multiple advantages in the long run.
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