How is peak margin for trades calculated
Akhil Nallamuthu
BL Research Bureau |
Updated on
May 01, 2021
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To trade in cash market or derivatives market, one should have a minimum amount of money to initiate trades, and this is called margin. Peak margin is the highest margin that a market participant should maintain on a day.
The types of margin in cash and derivatives segment include VaR (value at risk) margin, ELM (extreme loss margin), SPAN (standard portfolio analysis of risk) margin and exposure margin. There are other margins such as ad-hoc margin and MTM (mark-to-market) margin.
To initiate trade in a futures contract, the minimum amount of margin required is SPAN plus exposure margin. For instance, you buy one lot Nifty 50 futures contract, the margin requirement would be approximately ₹1.6 lakh (SPAN margin of ₹1.38 lakh and exposure margin of ₹22,000). In earlier mechanism, brokers could allow intra-day trades by collecting less margin say, ₹1 lakh by offe
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