Margin Calculator

What is a Margin Calculator?

Futures and options are traded on margin: instead of paying the full contract value, you keep a deposit with your broker that the exchange blocks against the position. A margin calculator tells you that deposit before you place the order, so you know whether your account can carry the trade.

GoPocket's F&O margin calculator works out the exact SPAN and exposure margin for NSE, BSE and MCX contracts from the exchange's own risk files. It handles a single future, an option you want to sell, or a basket of several legs, and shows the margin benefit you get when those legs hedge each other.

How is F&O margin calculated?

Every futures and short option position needs an initial margin, made up of two parts. SPAN margin is the largest loss the exchange expects your position could make in a day, found by re-pricing it under a range of price and volatility moves. Exposure margin is an additional cushion, set as a percentage of the contract value.

When you hold several positions, SPAN looks at the portfolio as a whole. A loss on one leg that is offset by a gain on another lowers the worst-case loss, so the basket needs less margin than its legs would on their own. The difference is your margin benefit.

• ✓ Total margin = SPAN margin + Exposure margin, worked out on the whole basket
• ✓ Margin benefit = margin on the legs taken separately − margin on the hedged basket
• ✓ Exchanges publish fresh SPAN files several times a day, so the requirement moves with the market

Nifty, Bank Nifty and Sensex margin calculator

Index derivatives are the most traded contracts in India, and their margin changes with volatility and the size of the lot. To find the margin for Nifty futures, choose NFO, Futures and NIFTY with its expiry; for Bank Nifty or Fin Nifty, pick that symbol instead. Sensex and Bankex futures and options trade on BSE - choose BFO.

For index options, select Options, then the expiry, CE or PE and the strike. The calculator shows the margin to sell that option, and how much less you need if you buy a further out-of-the-money option against it.

Option selling margin vs option buying

Buying a call or a put needs only the premium: your loss can never be more than what you paid, so there is no SPAN margin to block. Selling an option is different - the loss can run well past the premium you collect - so the exchange asks for SPAN and exposure margin, often a large multiple of the premium.

That is why option sellers rarely sell naked. A short straddle or strangle, a credit spread or an iron condor needs far less margin once the bought options are in the basket. Add every leg of your strategy to the calculator to see the hedged margin, not the sum of the parts.

• ✓ Bull call / bear put spread - buy one strike, sell another of the same expiry
• ✓ Iron condor - a sold strangle protected by bought wings on both sides
• ✓ Covered future - a future hedged with an option against it

Futures margin calculator for stock futures

Stock futures carry higher margins than index futures because a single company's share can move more sharply than an index. The requirement also differs from stock to stock with its volatility. Choose NFO, Futures and the stock - RELIANCE, HDFCBANK, INFY, SBIN - to see the margin for one lot before you take the trade.

MCX commodity margin calculator

Commodity futures and options on MCX are margined with SPAN too. Choose MCX to calculate crude oil margin, natural gas margin, gold and gold mini margin, silver and silver mini margin, or base metals like copper, zinc and aluminium. Lot sizes are applied for you, so one lot is priced as the exchange defines it.

Mini contracts such as CRUDEOILM, GOLDM, SILVERM and NATGASMINI need a fraction of the margin of the full-size contract, which makes them a common way to start trading commodities with a smaller account.

SEBI margin rules you should know

SEBI requires brokers to collect the full upfront margin - SPAN plus exposure - before a derivatives position is taken. If the margin in your account falls short, the exchange levies a penalty on the shortfall, which is why it pays to check the requirement in advance.

Margins can also rise on expiry day. The exchanges add an extra margin on short option positions expiring that day, and the margin benefit on calendar spreads does not apply to the leg that is expiring. Always leave a buffer above the calculated figure.

Tips to manage your F&O margin

• ✓ Check the margin before you trade - a shortfall can attract a penalty or a square-off
• ✓ Hedge short options with a bought option to cut the margin sharply
• ✓ Keep a buffer: SPAN files change during the day and volatility can push margins up
• ✓ Watch expiry day, when extra margin applies to short options
• ✓ Use mini commodity contracts or fewer lots if the margin is more than you want to block