The margin requirement for derivatives is set to go up!
As per SEBI circular dated 17th December 2018 and NSE Circular dated 26th December 2018. Margins
required for trading in Equity derivatives segment are going to be revised from 21st January 2019,
- The Margin Period of Risk (MPOR) for all products in the equity derivatives segment has been set as 2 days. Therefore, the initial and exposure margins shall be scaled up. For initial margins, the revised MPOR shall be given effect by way of scaling up the Price Scan Range (PSR) used for computing the Worst Scenario Loss.
- The computation for the Price Scan Range (PSR) has been changed to include Square root (2) instead of 1 for Index & stock futures & options. The aim of PSR is to cover the worst possible movement in the derivative contracts on a single day.
- Short Option Minimum (SOM) – This is the minimum margins for options contracts that are beyond the Price Scan Range (PSR). The minimum charge will be revised to 5%.
- Exposure Margin – The exposure margin percentage computed for index and stock
products shall be scaled up by the square root of 2 and shall be as under:- Index Futures and Options 3%*square root (2)
– Stock Futures and Options (Higher of 5% or 1.5 sigma) *square root (2)
For more information, please read the circulars shared in the links above.