TradeSmart Commodity margin calculator helps you to get an idea on how much is the span and exposure margin required for trading in commodity derivatives.
The TradeSmart commodity margin calculator helps you to understand how much money your trading account should have so that your orders can be executed seamlessly. You can plan out your risk and loss margin and make a careful trading strategy.
Unlike the futures and options margin, which is used to hedge against losses, the commodity margin is the minimum amount that allows a trader to participate in exchanging a commodity for money. There is an initial margin and maintenance margin in commodity trading, which you can find out from the calculator.
The SPAN margin is calculated by the approach of weighing the overall risk of your portfolio, i.e. standardised portfolio analysis of risk while trading commodities. It changes based on the volatility of the commodity and is meant to accommodate the possibility of worst losses for every position.
The commodity SPAN margin calculator is for a one-day horizon but not in the case of futures contracts, as it is not possible to calculate the mark to market value. Therefore, the margin required for commodity trading of futures is calculated over a two-day horizon.
You need to give a margin to trade made up by Value at Risk margin (VaR) and Extreme Loss Margin (ELM). The VaR is generally 10% for a commodity futures contract. Knowing this is essential for the risk management of your portfolio.
Extreme loss margin covers loss-making situations beyond the coverage provided by the initial loss margin from SPAN margin calculation. It is 1% on open positions of options contracts and 1.25% on futures contracts.
The TradeSmart calculator to find out the margin for commodity uses MCX data. You can find out the margins for intraday positions by setting it for MIS orders and positional trading by choosing the NRML setting.
The total MCX margin for positional trading includes MCX Span Margin, Exposure Margin and the Extreme Loss Margin (ELM). Whereas for intraday trading the margin calculator arrives at a percentage of the margins demanded by positional trading.
The commodity margin calculator will let you choose the lots to tell you margin requirements. Generally, it varies by commodity; 1kg for gold but 100 barrels for crude.
Whenever SEBI notifies any change in rules allowing a discount it will be passed on to you. The minimum margin is set as to be collected by the broker. Sometimes, discounts are offered to promote hedging or the use of new indices.
This is a margin required for commodity trading, calculated to cover losses. At the end of the trading day, if the prices decline the buyer has to pay it and if the prices increase, the seller has to pay it.
VaR margin and ELM margin/SPAN margin is collected right away whereas the mark to market, delivery margin and others are collected within T+2 days of settlement.