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.
The concept of margin is one of the most fundamental concepts to grasp while trading futures and options. Before you can begin trading F&O, you must deposit an initial margin with your broker to protect it in the event that the buyer or seller suffers losses due to price volatility when trading futures and options.
You can trade in increments of your initial margin deposit. For example, if the margin is 10% and you want to invest Rs. 10 lakh, you must deposit Rs. 100,000 at F&O. This multiple to trade is referred to as leverage.
Of course, margins differ depending on the benchmark and the stock. So, in order to calculate the margin required to trade in F&O for the stocks or indexes you desire, you need an F&O calculator.
An online 5paisa margin calculator is a tool that assists you in easily calculating the margin requirement on F&O trades. The outcome of these calculators is determined by user input.
It can also be used to calculate the margin benefit of multi-leg F&O strategies across different segments.
You can use the 5paisa margin calculator to compute the outcome by simply entering variables such as Exchange, Product, Quantity, and Buy/Sell. It is a basic tool that does not require any technical knowledge to use.
VaR is a method that assesses the likelihood that an asset or group of assets (such as a share or a portfolio of a few shares) will lose value based on a statistical analysis of past price patterns and volatilities. Three elements make up a VaR statistic: a time frame, a level of confidence, and a loss amount (or loss percentage).
Let's look at an example to better understand the idea of Var:
Let's say you purchased stock in a corporation. It currently has a market value of Rs. 50 lakh. Of course, we have no idea what the market value of these shares will be the following day.
Using the VaR methodology, you might be holding these shares if the 1-day VaR at 99% confidence is Rs. 4 lakhs. This suggests that you can predict, with 99% certainty, that the value of the shares won't decrease by more than Rs. 4 lakhs throughout the course of the next day, even under regular trading conditions.
Companies are categorized into 3 groups based on the frequency of share trading and liquidity (i.e., how much a large buy or sell order affects the price of the scrip, also known as "impact cost") to determine the VaR margin rate.
The extreme loss margin is concerned with protecting against potential losses that may not be covered by VaR margins. Any stock with an extreme loss margin has one that is greater than 1.5 times the daily LN return standard deviation over the previous six months, or 5% of the position's value. This margin rate is established at the start of each month by using rolling price data over the previous six months.
Before making a trade, traders can use the span margin calculator to calculate the margin (capital) needed in the NSE equity derivatives/commodity derivatives and currency derivatives segments.
The goal of the span is to determine the overall risk of each member's portfolio of futures and options contracts.
The value of an option at a particular moment in time is most directly influenced by three elements in conventional pricing models:
● Fundamental market value
● (Variability) of the underlying instrument's volatility
● Expiration date
The value of the futures and options held inside the portfolio will fluctuate as a result of these variables. To determine the most loss a portfolio could sustain from one day to the next, Span creates scenarios of likely changes in underlying prices and volatilities. The margin (capital) requirement is then set at a level high enough to cover this one-day loss.
The benefits of using the 5paisa Online Margin calculator:
- It helps you to calculate the F&O margin easily and quickly
- It is free of cost
Margin in Equity refers to the amount of equity an investor has in their brokerage account. "To margin" or "buying on margin" means to use the money borrowed from a broker to buy equities. An investor must have a margin account to do so, rather than a standard brokerage account.
The bare minimum payment made to the broker when a trade occurs is known as an upfront margin. In this system, the broker gathers the necessary system-generated margin. The upfront margin is so-called because it occurs before the trade is actually consummated.
The exposure margin is typically charged in addition to the SPAN margin and is typically done so at the broker's discretion. It is gathered to offer defence against a broker's liability that can potentially develop owing to irregular fluctuations in the market. It is also known as an additional margin.
The extreme loss margin tries to protect against potential losses that may not be covered by VaR margins. For any stock, the extreme loss margin is greater than 1.5 times the daily LN return standard deviation over the previous six months, or 5% of the position's value.