Derivatives
Margin
Update : Jun. 03, 2011
When trading futures and options, it is necessary to open an account for futures and options trading with securities companies and deposit Margin with them.
Margin is required as collateral that investors deposit with securities companies to cover potential losses incurred from futures and options transactions in the future. Margin must be deposited by the day following the day of the trade. In practice, however, a number of securities companies appear to require investors to deposit the minimum Margin before starting trading.
Margin FAQ
Margin FAQ
Why do we need to deposit Margin?
Profits or losses from futures and options transactions are determined by the future prices of the underlying assets. Adverse fluctuations of such prices may cause significant losses in the future. Margin is deposited to ensure that the payments are made even when such losses are incurred.
What is Margin?
Margin is a deposit that is submitted as collateral to deal with adverse price fluctuations which may occur in the future.How much Margin is required to be deposited?
Margin required for futures and options trading positions is calculated by deducting the total net option value from the amount calculated based on SPAN®, a margin calculation method.
The total net option value is calculated by deducting the total short option value (the value that is calculated by multiplying the net amount of short and long positions by the amount per unit, which was converted from the clearing price of the issues of options transactions whose short positions exceed long positions) from the total long option value (the value that is calculated by multiplying the net amount of short and long positions by the amount per unit, which was converted from the clearing price of the issues of options transactions whose long positions exceed short positions).
Clearing house
Futures and options traded on the Tokyo Stock Exchange are cleared by Japan Securities Clearing Corporation (JSCC). JSCC is the entity which sets and announces various related parameters to SPAN®.
Links related to Margin
Please refer to the JSCC website for SPAN risk parameter files, SPAN parameters and other related matters.
Please click here for an outline of the margin system.
| Outline of margin and settlement system |
|
Note
SPAN® stands for Standard Portfolio Analysis of Risk, and is the margin calculation method developed by the Chicago Mercantile Exchange. It calculates margin based on risks incurred from the overall positions of futures and options transactions.