What is a Margin Calculator?
A margin calculator helps you understand how much money you can borrow from a stockbroker to purchase financial instruments like stocks, futures, options, and more.
In trading, margin refers to a loan that a trader can borrow from their stockbroker to buy securities they may not be able to afford. A margin can be obtained by depositing cash or securities as collateral.
Dhan’s online margin calculator lets you find out the Standard Portfolio Analysis of Risk (SPAN) margin and exposure margin for each future and option trade.
Exchanges like NSE and BSE use SPAN to calculate the maximum loss that a portfolio can experience in an F&O trade and subsequently use that to determine an appropriate margin.
The risk of other variables unaccounted for in SPAN is determined using the exposure margin. That said, margins are dynamic because the price of securities is dynamic and ever-changing.
Our online margin calculator shows you the latest margin for each tradable security on Dhan in a dynamic way so that you can make a decision based on real-time information.
How Does an Online Margin Calculator Work?
Margins are dynamic and change when the price of the stock, future, option, etc changes. A margin calculator must keep up with these changes to give you the latest data.
Our online margin calculator uses the latest information provided by exchanges for every segment, including:
This means that the margin on equities for any given stock or ETF is calculated by using:
- Value At Risk (VAR)
- Extreme Loss Margin (ELM)
- Standard Portfolio Analysis of Risk (SPAN)
- Exposure Margin
Value At Risk (VAR) + Extreme Loss Margin (ELM)
The margin on Futures & options for equities, commodities, and currencies is calculated by using:
Standard Portfolio Analysis of Risk (SPAN) + Exposure Margin
How to Calculate Leverage Using Online Margin Calculator?
Leverage for any stock, ETF, currency, and commodity is the reciprocal of margin multiplied by 100. That simply means that it is expressed as a ratio of the margin percentage.
For example, if the margin is 20%, then the leverage ratio will be calculated as: (1/20)*100=5
The leverage here would thus be 5x, meaning you can buy ₹ 5000 worth of shares on leverage if the market price of the stock is ₹ 1000.