SAMCO?s ED & President Nilesh Sharma Says Margin Calculators Are Game Changers for Traders
21.12.2023 - 14:07:54
activity, which hit a record high in FY23 and surpassed the trading volumes of the previous year within just 7 months. Enthusiasm for F&O trading has remained unwavering despite SEBI’s findings that the derivatives market has been less than lucrative for most traders — with nearly 90% suffering losses.
This surge in trading activity has increased the focus on the crucial role of margin requirements in the F&O segment. To assist traders in navigating these requirements, SAMCO Securities offers a user-friendly SPAN margin calculator. This online tool enables traders in the derivatives segment to understand and plan for their margin obligations efficiently and transparently.
The Importance of ‘Margin’ for F&O Traders
Margin in futures and options trading is essentially a form of financial leverage that allows a trader to borrow money and trade with more than their available capital. This amplifies their buying power and empowers them to control a much larger position in the market than what their own capital would otherwise allow. In simple terms, the margin facility allows traders to buy more contracts than they could with their cash alone.
Consequently, if the market moves as expected, the trader’s returns are enhanced because the profits are calculated on the total value of the position — and not just on their initial investment. This can lead to significantly higher returns, which is the primary allure of using margins in futures and options trading.
Margin trading also offers the advantage of diversification. With more buying power, traders can spread their investments across a wider array of derivatives like index futures, index options and even individual stock options. This reduces the risk that comes from concentrating all investments in a single asset or sector.
Nilesh Sharma, Executive Director & President of SAMCO Securities, explains the relevance of margin in today’s particularly dynamic F&O segment and brings up the central issue for traders availing of this facility.
“With the remarkable market rally we’ve witnessed since March, the introduction of multiple index options and the availability of daily expiries, there's a heightened interest in futures and options trading. It's an exciting time in the market, but this environment also makes it especially important for traders to be fully aware of the necessary margins before entering any position.
Manually calculating these margins for each trade is impractical and nearly impossible in real-time. That’s precisely why a margin calculator is indispensable for traders today. It allows them to make quick and well-informed decisions, and ensures they can meet the margin requirements and manage risk effectively.”
Sharma’s (and SAMCO Securities’) take on this issue isn’t just all talk. The stock broking firm has deployed a sophisticated industry-first SPAN margin calculator that helps traders assess the risk of the positions before entering a trade.
SAMCO’s Margin Calculator: The Key to Well-Planned F&O Strategies
Given the array of factors that influence margin money in futures and options trading, navigating the complexities of these requirements can be daunting. Factors such as market volatility, underlying price movements and specific trade or position sizes play a crucial role in determining the margin needed.
For instance, option writing or shorting involves different margin calculations compared to simple buying or selling strategies. Similarly, multi-leg F&O strategies — which might involve trades in equity, commodities or currency derivatives — come with their unique margin requirements.
The margin required varies not just from one trade to another, but also within a single trading position over time as market conditions fluctuate. This variability makes it challenging for traders to accurately gauge the margin needed for each trade and hinders their ability to plan options trading strategies effectively.
This is where SAMCO’s SPAN margin calculator emerges as a game-changing tool. It simplifies the process of computing margin requirements almost instantaneously. The calculator stands out as India's first online trading tool that allows traders to calculate comprehensive SPAN margin requirements for a wide array of trading activities. This includes option writing or executing multi-leg F&O strategies across different segments like equity, commodities, and currency.
The calculator efficiently computes both the SPAN margin and the exposure margin required by exchanges. The SPAN margin is calculated based on various factors, including volatility and underlying price movements, while the exposure margin is typically levied as a percentage of the contract value.
Speaking of the problem that SAMCO aims to address through this pioneering trading tool, Nilesh Sharma elaborates:
“At SAMCO Securities, we understand the critical need for precise margin calculations in F&O trading. That's why we developed the SAMCO SPAN Margin Calculator, a tool specifically designed to instantly provide traders with accurate margin requirements. This innovation directly addresses the complexities of varying margin requirements across different trades and market conditions. Our calculator simplifies these calculations, allowing traders to focus more on their trading strategies and less on the manual estimation of margins.”
By providing these detailed and instant margin calculations, SAMCO’s margin calculator empowers traders to make more informed and well-planned trading decisions. It also helps tailor their strategies to the dynamic market conditions while ensuring regulatory compliance and effective risk management.
Beyond the Margin: Choosing a Margin Service Provider
While understanding margin requirements is a cornerstone of successful futures and options trading, choosing the right margin service provider or stockbroker is equally crucial. A broker acts as a gateway to the markets, so their policies and services can significantly impact the efficiency and effectiveness of a trader’s strategy.
Traders should be aware that brokers offer two primary types of margins: cash margin and margin against shares. Each type caters to different trading needs and strategies.
This surge in trading activity has increased the focus on the crucial role of margin requirements in the F&O segment. To assist traders in navigating these requirements, SAMCO Securities offers a user-friendly SPAN margin calculator. This online tool enables traders in the derivatives segment to understand and plan for their margin obligations efficiently and transparently.
The Importance of ‘Margin’ for F&O Traders
Margin in futures and options trading is essentially a form of financial leverage that allows a trader to borrow money and trade with more than their available capital. This amplifies their buying power and empowers them to control a much larger position in the market than what their own capital would otherwise allow. In simple terms, the margin facility allows traders to buy more contracts than they could with their cash alone.
Consequently, if the market moves as expected, the trader’s returns are enhanced because the profits are calculated on the total value of the position — and not just on their initial investment. This can lead to significantly higher returns, which is the primary allure of using margins in futures and options trading.
Margin trading also offers the advantage of diversification. With more buying power, traders can spread their investments across a wider array of derivatives like index futures, index options and even individual stock options. This reduces the risk that comes from concentrating all investments in a single asset or sector.
Nilesh Sharma, Executive Director & President of SAMCO Securities, explains the relevance of margin in today’s particularly dynamic F&O segment and brings up the central issue for traders availing of this facility.
“With the remarkable market rally we’ve witnessed since March, the introduction of multiple index options and the availability of daily expiries, there's a heightened interest in futures and options trading. It's an exciting time in the market, but this environment also makes it especially important for traders to be fully aware of the necessary margins before entering any position.
Manually calculating these margins for each trade is impractical and nearly impossible in real-time. That’s precisely why a margin calculator is indispensable for traders today. It allows them to make quick and well-informed decisions, and ensures they can meet the margin requirements and manage risk effectively.”
Sharma’s (and SAMCO Securities’) take on this issue isn’t just all talk. The stock broking firm has deployed a sophisticated industry-first SPAN margin calculator that helps traders assess the risk of the positions before entering a trade.
SAMCO’s Margin Calculator: The Key to Well-Planned F&O Strategies
Given the array of factors that influence margin money in futures and options trading, navigating the complexities of these requirements can be daunting. Factors such as market volatility, underlying price movements and specific trade or position sizes play a crucial role in determining the margin needed.
For instance, option writing or shorting involves different margin calculations compared to simple buying or selling strategies. Similarly, multi-leg F&O strategies — which might involve trades in equity, commodities or currency derivatives — come with their unique margin requirements.
The margin required varies not just from one trade to another, but also within a single trading position over time as market conditions fluctuate. This variability makes it challenging for traders to accurately gauge the margin needed for each trade and hinders their ability to plan options trading strategies effectively.
This is where SAMCO’s SPAN margin calculator emerges as a game-changing tool. It simplifies the process of computing margin requirements almost instantaneously. The calculator stands out as India's first online trading tool that allows traders to calculate comprehensive SPAN margin requirements for a wide array of trading activities. This includes option writing or executing multi-leg F&O strategies across different segments like equity, commodities, and currency.
The calculator efficiently computes both the SPAN margin and the exposure margin required by exchanges. The SPAN margin is calculated based on various factors, including volatility and underlying price movements, while the exposure margin is typically levied as a percentage of the contract value.
Speaking of the problem that SAMCO aims to address through this pioneering trading tool, Nilesh Sharma elaborates:
“At SAMCO Securities, we understand the critical need for precise margin calculations in F&O trading. That's why we developed the SAMCO SPAN Margin Calculator, a tool specifically designed to instantly provide traders with accurate margin requirements. This innovation directly addresses the complexities of varying margin requirements across different trades and market conditions. Our calculator simplifies these calculations, allowing traders to focus more on their trading strategies and less on the manual estimation of margins.”
By providing these detailed and instant margin calculations, SAMCO’s margin calculator empowers traders to make more informed and well-planned trading decisions. It also helps tailor their strategies to the dynamic market conditions while ensuring regulatory compliance and effective risk management.
Beyond the Margin: Choosing a Margin Service Provider
While understanding margin requirements is a cornerstone of successful futures and options trading, choosing the right margin service provider or stockbroker is equally crucial. A broker acts as a gateway to the markets, so their policies and services can significantly impact the efficiency and effectiveness of a trader’s strategy.
Traders should be aware that brokers offer two primary types of margins: cash margin and margin against shares. Each type caters to different trading needs and strategies.
MTF
Here, traders deposit cash as collateral to take positions in the market. When evaluating a broker for cash margin services, one key aspect to consider is the extent of leverage offered. Leverage can amplify the potential gains, but it also increases risk. Therefore, traders must understand a broker's policy on leverage, how they calculate it and any associated costs. Additionally, traders should assess the broker's reliability, the transparency of their margin calls and the responsiveness of their customer service, as these factors can greatly impact trading experiences during volatile market conditions.
When traders opt for this facility, they use their existing shareholdings as collateral to obtain margin funding. For traders considering this option, it’s important to be aware of the list of shares that are accepted as security by the broker. Not all shares may be eligible, and the list of acceptable securities can vary significantly between brokers. Another critical aspect to consider is how a broker values the shares offered as collateral. There may be a 'haircut' or discount on the value of the shares, and this will affect the total margin funding that traders can receive against their shareholdings.
When traders opt for this facility, they use their existing shareholdings as collateral to obtain margin funding. For traders considering this option, it’s important to be aware of the list of shares that are accepted as security by the broker. Not all shares may be eligible, and the list of acceptable securities can vary significantly between brokers. Another critical aspect to consider is how a broker values the shares offered as collateral. There may be a 'haircut' or discount on the value of the shares, and this will affect the total margin funding that traders can receive against their shareholdings.
Upgraded Trading with SAMCO’s Margin Trading Facility
SAMCO's Margin Trading Facility (MTF), aligned with the advanced needs of today's traders, brings a significant upgrade to the F&O trading experience. Through its MTF services offered as cash margins or margin against stocks, SAMCO Securities provides an exceptional combination of leverage and flexibility that’s tailored to the dynamic landscape of modern derivatives trading.
A standout feature of SAMCO's MTF is the provision of up to 4X leverage in equity. With the MTF offered, traders can boost their buying power in the NSE and BSE cash market segments. This means that with a cash balance of Rs. 1,00,000, traders can take delivery of stocks up to Rs. 4,00,000. Such leverage increases potential returns and maximises capital efficiency, allowing traders to seize opportunities they might otherwise have to miss due to capital constraints.
Furthermore, SAMCO distinguishes itself by offering these leverages at the lower interest rates in the industry. This aspect is crucial as lower interest rates on borrowed funds mean reduced costs for traders — a factor that directly impacts the profitability of their trades. By ensuring that the cost of leverage remains competitive, SAMCO makes high-volume trading more accessible and sustainable for traders.
SAMCO's MTF service further expands the scope of margin facilities and allows traders to use a wide range of shares and mutual fund holdings as collateral. This flexibility is particularly beneficial for those who have invested in long-term holdings but wish to leverage them for trading in F&O. It also serves as a complete margin against shares trading accounts, providing trading limits for intraday and positional trading. It's also noteworthy that this service functions effectively as a zero-balance trading account, offering traders the ability to start trading without any cash balance in their trading account.
Speaking of the impact of these services on the SAMCO trading community, Nilesh Sharma reveals, “At SAMCO, we’re constantly striving to empower our customers with tools and services that not only meet but exceed their trading needs. Our Margin Trading Facility, offering up to 4X leverage at the lowest interest rates and accepting a diverse range of shares and mutual funds as collateral, is designed to do just that. We believe that providing such leverage options, combined with financial efficiency, is pivotal for traders looking to maximise their potential in the F&O market.”
Together, SAMCO’s SPAN margin calculator and MTF provide F&O traders with a comprehensive toolkit, combining flexible leverage options and precise margin calculations. This synergy of services positions SAMCO as a one-stop solution for traders navigating the dynamic F&O market.
About SAMCO Securities
SAMCO Securities was incorporated by Mr Jimeet Modi, Founder & CEO of SAMCO Group in 2015. As the country’s leading wealth-tech platform, SAMCO Securities provides retail investors access to sophisticated financial technology and makes their wealth-creation journey simple, informed, and cost-effective. SAMCO Securities’ mission is to eliminate the existing challenges faced by traders and investors and democratise access to the wealth management process for every Indian. With customer centricity at SAMCO’s core, we implement a quantitative approach to provide differentiated solutions that empower our customers in acing the capital markets.
For more details, visit https://www.samco.in/.
SAMCO Securities was incorporated by Mr Jimeet Modi, Founder & CEO of SAMCO Group in 2015. As the country’s leading wealth-tech platform, SAMCO Securities provides retail investors access to sophisticated financial technology and makes their wealth-creation journey simple, informed, and cost-effective. SAMCO Securities’ mission is to eliminate the existing challenges faced by traders and investors and democratise access to the wealth management process for every Indian. With customer centricity at SAMCO’s core, we implement a quantitative approach to provide differentiated solutions that empower our customers in acing the capital markets.
For more details, visit https://www.samco.in/.
