Margin

Ex. Sample calculation of Margin Requirement

Portfolio

Assume that an investor holds the following portfolio.

Nikkei 225 TOPIX
Sep. Futures Dec. Futures Sep. Call Options with the exercise price 13,000 yen
Sep. Futures
S L S L S L S L
5 10 3 0 1 0 3 1
Net Positions 5 3 1 2
Inter-Month Net Positions 2
Number of Spread Positions 3

(note)
  • ・S: Short
  • ・L: Long

First, calculate risk (estimated maximum losses) for each position of Nikkei 225 and TOPIX.
Positions for Nikkei 225: 2 long futures and 1 short options.

Assume that, the risk (for Nikkei 225) = 900 thousand yen.

Position for TOPIX; 2 short futures.

Assume that, the risk (for TOPIX) = 1,000 thousand yen.

Second, calculate Intra-Commodity (Inter-Month) Spread Charge, in order to take into consideration variance of actual price movements among different contract months.

Assume that,Intra-Commodity (Inter-Month) Spread Charge per unit(for Nikkei 225) = 100 thousand yen.

Then, multiply Intra-Commodity (Inter-Month) Spread Charge per unit by the Number of Spread Positions.

As a result, Intra-Commodity (Inter-Month) Spread Charge(for Nikkei 225) = 100 thousand yen x 3 units = 300 thousand yen.

In addition, calculate Inter-Commodity Spread Credit, because positive correlation between price movements in different underlying assets (e.g. Nikkei 225 and TOPIX) can be seen, and the risk can be offset.

Assume that Inter-Commodity Spread Credit = 700 thousand yen.

Adding and deducting the above amount can calculate SPAN Requirement. (In fact, the larger amount compared to Short Option Minimum Charge shall be the SPAN Requirement.)

As a result,
+ ( 1,000 thousand yen - 700 thousand yen) = 800 thounsand yen.

Next, calculate Net Option Value.
Assume that the settlement price of above option on that day is 900 yen. Total Amount of Net Option Value shall be as follows:

Total Amount of Net Option Value = Total Amount of Long Option Value - Total Amount of Short Option Value
= (0 unit - 1 unit) × 900 yen × 1,000 = - 900 thousand yen.


Accordingly, Margin Requirement shall be as follows:

Margin Requirement = SPAN Requirement - Total Amount of Net Option Value
= 800 thousand yen - (- 900 thousand yen) = 1,700 thousand yen.

(note)
  • ・Actual calculation is slightly different.