Module 10 · Intermediate

Margin rules and funding

Cash-market margins, SPAN, premium funding, collateral and expiry.

5 chapters · Concepts, worked examples and self-checks

Helpful first: Trading and risk · Futures

Study it. Test it. Write it down.

Collateral solves one problem. Cash solves another.

Where can a solvent-looking account still run out of spendable cash?

Suppose a hypothetical account has ₹1,00,000 of securities collateral and ₹20,000 cash. At an assumed 20% haircut, eligible collateral is ₹80,000 and total eligible resources are ₹1,00,000. If an illustrative requirement is ₹90,000, total coverage appears sufficient. But a separate ₹30,000 immediate cash payment creates a ₹10,000 cash gap. Actual eligibility and cash-component rules depend on the applicable contract and intermediary; the figures here are not current exchange parameters.

Your research task

Separate notional exposure, eligible collateral, premium payment, daily settlement and delivery funding. Do not net unlike obligations merely because they appear in one account.
Use the current official margin and settlement documents, including effective dates and contract-specific circulars. Record what the broker applies in addition.
Stress a haircut increase, loss of an offset, collateral rejection and an adverse settlement debit at the same time. A single favourable-margin screenshot is not a financing plan.

What you should produce

Create separate cash and total-resource ledgers with due dates. Include the action to take before a funding shortfall rather than after a forced liquidation.

The trap to avoid: Assuming a displayed margin benefit is permanent, or that collateral value can always meet a time-sensitive cash obligation.

Original hypothetical study exercise. Pair it with the chapter sources below; verify current contract rules and product terms separately.

Chapters in this module

0 of 5 completed on this browser

01Margin is collateral, not a maximum lossSeparate economic exposure, blocked margin, cash settlement and broker risk controls before comparing leverage.3 min read 02SPAN, extreme-loss margin and portfolio offsetsUnderstand risk-model components and why a simple percentage calculator cannot reproduce an official portfolio margin calculation.3 min read 03Option premium, expiry and physical-delivery fundingDistinguish premium payable from a writer’s risk margin and from the cash or securities needed when contracts settle.3 min read 04Collateral, haircuts and cash-component requirementsUnderstand eligible collateral value, changing haircuts and the distinction between clearing-member rules and a broker’s client funding policy.3 min read 05Shortfalls, changing rules and a pre-expiry checklistLearn how to monitor a changing funding requirement and verify rules without relying on stale leverage tables or broker screenshots.3 min read

← All learning modules · Calculators

Keep exploring

Learning beyond this page.

Follow Orchid Research for more educational perspectives.

YouTube ↗Instagram ↗X / Twitter ↗Telegram ↗