Understanding Margin

Hi

Would appreciate if anybody can answer following querry

1) If we are buying or selling option then how much margin does the exchange takes from broker for such transaction

2)How much margin should broker take from the client if the client is buying or selling option

Regards

M doubtful nyone is a broker here. Nd m sure broker wont reveal this to ny client.

To ur second question... for buying u hv to pay in full.. for shorting, depends on broker

Thanks for your reply

Actually i am new to this field. Could you let me know are there any books available in the market for beginners explaining how margin is charged in, future, currency and option contract

I have read NSE modules but still could not understand span margin and how margin is charged on option contract



Thanks

If you want to know how much you need to be able to buy/sell options, futures etc.. then you can contact your broker as it differs from one broker to another.

But if you just wanted to understand the technicalities.. then here as a pdf from NSE.

http://www.nseindia.com/content/assist/asst_Margins_faq.pdf

I hv shorted options in Zerodha a/c. They charged me 28 - 30 K.

Not sure about others.

Thanks again for your reply

I have actually read the link that you have send.
I really want to understand the concept in detailed. Hence would like to read book which will explain the concept in detailed with example

For example The link talks about notional value but nowhere they have specified what is the meaning of notional value

a. When you are buying option - simply the premium of buying, say you bought Nifty (new lot size 25) 8300 Call @ Rs.100 then you need 25*100=Rs. 2500 margin

b. When you are selling option - the standard margin of future contact minus premium you received on option selling, say you Sold Nifty (new lot size 25) 8300 Call @ Rs.100 then you need Rs. 14600 (margin of future of that scrip on that particular date) - Rs. 2500 (margin you received on selling option) = Rs. 12100

c. The margin demanded by exchange are same as described above.

d. And in 99% case brokers demand the same margin as of described above.

e. this margin of future (which you need to deposit when you short the option) has two component 1. Span Margin (for nifty on ordinary days it is in the range of 5%), 2. Exposure Margin (for nifty on ordinary days it is in the range of 3%) = thus total approx 8% of original nifty value

Thanks for your reply

Is the rate of span margin daily published by excahnge. If yes whr will i get the same on website. Because our broker says they dont get the rate because it is calculated by software and he does not tell us the basis of collecting margin money when he invest our money in option

Most of the broking companies upload margin file on their website, just google it and download 5-7 of them. You will find the same margin in most of the cases.

In case you find him reserving more margin than "Future value - premium received" change your broker, and specially if it is a so called big brand broker and charging you Rs. 50-100 per lot / 0.03-0.04% brokerage

Then you must Move to any discount broker, i can suggest SAS Online, but you can choose any!

you may get an idea from this calculator
https://zerodha.com/margin-calculator/SPAN/