We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
Key takeaways from this chapter
- Zerodha’s margin calculator is a simple tool that lets you calculate the margin required for a futures contract.
- The margin calculator has many versatile features inbuilt.
- The margin calculator gives the split up between the SPAN and Exposure margin.
- At any given point, NSE ensures there are three contracts of the same underlying, which expire on three different (but consecutive) months.
- A trader can choose the contract of his choice based on the expiry date.
- The contract belonging to the current month is called ‘Current Month Contract’, the next month contract is called ‘Mid Month’, and the 3rd one is called “Far Month Contract.’
- The current month contract expires on every expiry, and a new far month contract is introduced. The mid-month contract would graduate to the current month contract in the process.
- A calendar spread is a trading technique that involves buying a particular month contract and selling another month contract simultaneously for the same underlying.
- When a calendar spread is initiated, the margins required are lower since the risk is drastically reduced.