InvestorQ : Is margining of currency derivatives same as equity derivatives?
Neelam Naik made post

Is margining of currency derivatives same as equity derivatives?

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3 years ago
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While the logic is the same, the levels of margins on currency trading are much lower compared to equities and indices. There is a SPAN margin (based on the concept of value-at-risk VAR) and then there is the exposure margin (extreme loss margin or ELM). The combination of these two items will give you the initial margins. The overall margin requirement (SPAN + Exposure) is about 2.5% of the value of the contract for overnight trades and about 1.25% for intraday trades. That implies a 40 times leverage for overnight trades and 80 times for intraday trades. This is the lowest margin among other derivative products trading in India. This is because currencies normally stick to a much narrower range compared to equities. Since volatility is lower, the margins are also lower.

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