All you need to know about F&O margins and how to calculate it

Broadly, there are two types of margins that are normally collected. At the time of taking the position you are required to pay the Initial Margin on the position (SPAN + ELM margins).

If you are buying or selling a futures contract, your broker collects margins. Normally, your trading account has to be funded with margins before you can initiate a trade. Margins have to be paid, irrespective of whether you buy or sell a futures contract. Margins on futures trading are meant to cover the risk of adverse price movements. When you buy futures of the Nifty and if the Nifty goes down, there is a notional loss and that is your risk. Since markets are volatile, margins are essentially collected to cover this volatility risk. So, how does futures margin work?