Devolvement margin
Charged equally to buyers and sellers of Options on Futures over the last three days — E-2, E-1 and E — at one-third each day plus any backlog, so that margin obligations on the resulting futures position are already…
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- ClearingThe daily accounting step that reconciles what every party owes and is owed on its open and closed positions, and turns a day of trades into one net obligation per member.
- Compulsory deliveryA delivery logic under which every position still open at expiry must give or take physical delivery — neither side can elect to settle in cash.
- Delivery default penaltyThe SEBI-prescribed charge on a seller who fails to deliver against an expiring contract — a fixed percentage of the settlement price plus a replacement cost, most of which is paid over to the buyer.
- Due Date RateThe rate at which an expiring commodity contract is finally settled — the Final Settlement Price, normally the simple average of the polled spot prices of the expiry day and the two preceding days.
- Extreme Loss MarginA flat 3.5 per cent margin collected on cash-market positions to cover losses falling outside what the VaR margin is designed to capture.
- Initial marginThe deposit both the buyer and the seller of a futures contract must place before the position is accepted, sized to cover a 99% worst-case one-day loss on that position.
Where this is taught
Free preparation for NISM Series XVIRelated terms
- Contrary instructionAn instruction from the holder of an in-the-money option telling the exchange **not** to exercise it — the only way to stop an ITM contract being exercised automatically at expiry.
- Short Option Minimum MarginThe SPAN-computed margin charged to the writer of a commodity option, floored by SEBI-prescribed minimum volatility scan ranges so that a cheap option cannot be written on a trivial margin.
- Tender period marginAn extra margin charged at client level on all open positions once a contract enters its tender or delivery period — the higher of 20% of contract value, or 3% plus a five-day 99% VaR of spot prices.
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