Option Margin Calculator

Calculate Option Margin







Formula

To calculate the Option Margin (\(OM\)):

\[ OM = (OP \times NS \times MC) + (NS \times PC) \]

Where:

What is an Option Margin?

Option Margin is a type of collateral that the holder of an options contract is required to deposit with their broker or trading platform to cover the risk of default. It is essentially a deposit on the maximum potential loss of the options contract. The amount of the margin varies depending on the type of option, the underlying asset, and market conditions. It is designed to protect both the broker and the other party in the options contract from the risk of the holder not being able to fulfill their obligations.

Example Calculation 1

Let's assume the following values:

Using the formula:

\[ OM = (2 \times 100 \times 0.2) + (100 \times 10) = 40 + 1000 = 1040 $ \]

The option margin is $1040.

Example Calculation 2

Let's assume the following values:

Using the formula:

\[ OM = (1.5 \times 200 \times 0.25) + (200 \times 15) = 75 + 3000 = 3075 $ \]

The option margin is $3075.