Margin & Brokerage Calculator for F&O Trading Stock markets have risen as one of the most popular forms of investment in India during the last couple of decades. While you can invest in various types of assets in the stock markets like equity, commodities, currency, etc., investors find F&O (Futures & Options) to be a better investment option. F&O investments typically involve an initial margin deposit which is only a certain percentage of the total value of transactions you can carry out. This means that the amount of trade you can execute in F&Os is much higher than the actual margin that you deposit. Hence, it is important for F&O investors to properly understand the margin requirements. A margin calculator can help you calculate the accurate amount of the margin required. Another important element of stock market investments is the brokerage charge for every transaction. Brokers sometimes do not disclose all the information about charges to lure investors. Hence, using a brokerage calculator can tell you the actual charges for a stock market transaction and reveal if some charges are hidden by the brokers.
F&O Margin Calculator When you invest in shares, you are allowed to purchase shares up to the value of your fund balance. In the case of F&Os, instead of depositing the entire value upfront, brokers allow you to deposit the initial margin and trade for a much higher value. This is because the loss or gain from an F&O transaction is limited and the premiums charged are much lower. Using a margin calculator can help you accurately assess the amount you have to pay upfront for investing in F&O. While you don’t have to worry about the calculations, here are the components of F&O Margin charges. 1) SPAN Margin: Standardised Portfolio Analysis of Risk (SPAN) is a margin collected by brokers based on a percentage of the total contract value. Ex: If you purchase an option worth INR 1,00,000 and the SPAN is 3%, you need to deposit INR 3,000. There are 2 parameters considered for SPAN margin: a) The Underlying Risk in the Transaction b) The Historical record of the volatility of the Risk 2) Calendar Spread Margin: Investors use F&Os for hedging their risk. As a result, they sell and buy options at different rates for different expiry dates at the same time. To safeguard the broker against these fluctuations, a Calendar Spread Margin is charged. (Spread is the difference between the bid and ask quotations of a stock)