Had some queries on margin requirements for taking positional futures.
For example, if I go long in SBI; the margin required is 39,000.00 as per site. Assuming I’ve 1 Lakh in my account and the current futures price in SBI is quoted at 2491. Till what price can I hold the position before the position gets squared off and how does the settlement takes place daily.
What is the difference between Equity futures margin and SPAN margin?
Please advise with the help of an example (preferable of the above)
Margin required also called Equity futures margin = SPAN margin+ Exposure margin
SPAN margin is the minimum that you will need to have in your account as per exchange stipulation on an overnight basis. If you have lesser margin than this, exchange charges a penalty.
Exposure is what exchanges ask the broker to collect over and above SPAN so that the penalty issue never arises.
In case of SBI, Margin = 39000 = 24000 as SPAN + 15000 as Exposure (you can see this as Equity SPAN margin (PDF) on our margin page or use our SPAN calculator).
You have Rs 1lk in your account, so you can hold your SBI futures until you loose 76000 at which point it will be squared off by our RMS team, if you don't do it yourself.
1 lot of SBI is 125, so every point has an Impact of Rs 125. SBI is around 2500, so if SBI loses around 608 points it will cause you a loss of Rs 76000 (in case you have bought SBI futures) and your account balance will reach Rs 24000 the minimum required, and your position will be forcibly closed.
Futures have what is called daily marked to market. So if you bought SBI today at 2500 and SBI ended the day at 2400, Rs 12500 ( 125 x 100) is debited from your 1lk. If it goes up by 100, Rs 12500 is credited to your account.
This daily MTM keeps happening until the last day of expiry, the day after which the contract will cease to exist. So on the expiry day an MTM is done on your open futures position, the contracts are closed, and the margin (SPAN + Expo) is unblocked.
Use this pdf to see what margin requirement for SBI futures.
It is calculated on Previous day’s closing price.
Span Margin is the exchange stipulated minimum requirement. Assuming you dont have any additional balance in your account after purchasing SBI futures, you can loose only upto Exposure Margin, after which it will be automatically squared off by Risk Management Team (when it goes below span margin).