One of the most important things to understand at the time of reading into futures and options is the concept of margins and before the individuals go with the option of trading into this it is very important to deposit the minimum amount which is referred to as the initial margin with the broker. The very basic aim at this particular point of time is to protect the broker if the buyer or seller makes any kind of losses while trading into futures and options because of the volatility in the prices. The people can trade in multiples of the initial margin which has been deposited for example if the initial margin is 10% and people want to invest Rs.10 lakhs in futures and options then they will need to deposit Rs.1,00,000 with the broker which will be the trading in leverage. The margins also differ from index to index and share to share which is the main reason that having proper access to a good margin calculator is very much important for the people so that they can trade into equity or index in the way the people want.
Before utilising the futures and options margin calculator it is very much important for the people to have a complete idea about different kinds of concepts like SPAN which stands for standardised portfolio analysis of risk and this is a calculator which will utilise the complex algorithms to determine the margins. This particular margin calculator will arrive at the initial margin equal to the highest loss a portfolio will suffer under several kinds of scenarios. SPAN margins are revised six times into a day which will make sure that the calculator will give different results depending upon the time of the day.
The National Stock Exchange margin calculator includes the value at risk margin which will help in estimating the probability of loss of value into the asset-based upon statistical analysis of the historical price trends and volatility. The margins will always depend upon securities being listed in two different kinds of groups like group 1, group 2 and group 3. Another important thing to be taken care of is the extreme loss margin which is higher of the 2.5% or 1.5 times the standard deviation of the daily logarithmic returns of the security price in the last six months. It is calculated at the end of every month by taking the rolling data of the past six months and the result is applicable for the next month. So how much leverage with the portfolio gain exposure will always be dependent upon the type of assets and the trading type of the individuals. The broker who will be collecting the SPAN and the exposure more than a front will always allow the users to take a position in the future and options market in this particular month and will provide a good cover against the potential risk of adverse price movement.
Hence, being aware of the concept of margin calculator provided by companies like 5paisa is very much important because this particular calculator tool will allow the people to calculate the merger requirement on future and options trade easily and it will always be dependent upon the user input to determine the outcomes.
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