5paisa Margin Calculator Is a simplified margin calculator that helps you calculated comprehensive span margin requirements for F&O strategies while trading in cash, currency, commodity, and F&O before you proceed with your trade.
This comprehensive span margin calculator is aimed at offering transparency to your trading thus providing support in building a strong portfolio.
Margin in the stock market refers to the amount of equity borrowed from a broker to purchase investments. The act of ‘buying on margin’ can only be done using a margin account, an account in which the broker lends the money to an investor. The use of margin to purchase securities is analogous to using collateral for the loan and is profitable when the investor anticipates a higher rate of return than the interest on the loan.
The margin for stock exchange can be:
1. Gross exposure margin: This margin is payable on daily outstanding positions for each stock.
2. Special margin: In cases where stocks experience the undulating movement of prices, the stock exchange imposes a special margin of 25-50%.
3. Initial/ Daily margin: At the end of the trading day, brokers collect the margin payable against the open positions of the traders.
4. Mark to market margins: When the market price of a stock falls below its transaction price, the trader needs to pay the difference amount called as Mark to margin.
5. Ad-hoc margin: This is imposed on brokers with large positions or in particular illiquid low-priced stocks.
To start trading in futures and options, one needs to deposit an initial margin with the broker. This initial margin is calculated by using a software called SPAN- standard portfolio analysis of risk. This margin calculator uses a complex algorithm to determine margins. SPAN margins are revised 6 times a day and hence the value varies according to the time of the day. Margin calculators in simple terms are computational tools used to determine the marginal requirements of the trade.
Margin calculators are extremely important and essentials as it helps in determining the amount one needs to deposit with the broker. Margin calculators take into consideration factors like the risk-taking capacity of broking house, balance available in the trading account, and the scripe’s stock price, making it furthermore reliable for calculation of margin.
5paisa margin calculator is a simplified tool and can be used as follows:
1. Select the exchange
2. Choose either Futures or Options
3. Choose the ticker symbol
4. Select either Put or Call (type of trade)
5. Select the expiry date and the strike price.
6. Enter the lot size of the trade and calculate.
Based on the requirements, there are various margin calculators available like NSE F&O margin calculator, equity margin calculator, SPAN margin calculator, and options margin calculator. All the calculators use complex algorithms to determine margins. The NSE F&O margin calculator estimates the probability of loss in value of an asset based on a statistical analysis of price trends and volatility whereas SPAN calculates the highest loss in the portfolio under several scenarios. Equity margin is calculated by subtracting the money borrowed from the broker and the value of any in-the-money covered call options sold.
Margin calculators help traders compute the margin required to initiate a trade. This also serves as a good way to estimate the amount involved in purchasing securities, thus helping in outlining the financial map. Calculating the margin beforehand also helps in understanding if the amount in margin amount is sufficient enough to go ahead with the buying of a margin. Margin calculator helps in carrying out transparent transactions with the concerned broker.