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VAR Margin

VaR Margin is the equity cash-market margin covering a stock's worst expected one-day move, with rates ranging from a 9% floor for liquid stocks to 75% for illiquid ones.

More in “V”VAR MarginVegaVolatilityVolatility SkewVolume (Options Trading)VWAP (Volume Weighted Average Price)

What It Means

VaR (Value at Risk) Margin is the equity cash-market equivalent of SPAN — an upfront margin charged per stock to cover the worst reasonably expected one-day price move, based on that stock's recent volatility.

How It Works

Stocks are grouped by liquidity, and each group's VaR margin is floored at a different minimum: Group I (the most liquid, large-cap stocks) is 6 times the stock's calculated volatility, floored at 9%; Group II floors at 21.5%; Group III (illiquid stocks) carries a flat 50% VaR margin if it trades at least once a week on any exchange, or 75% if it doesn't.

Warning

Two stocks worth the same rupee amount can need very different margin — an illiquid, infrequently traded stock can demand several times more margin per rupee of exposure than a liquid large-cap.

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