For the understanding of such a term as “variationMargin ”is necessary to decipher what a margin is in the general sense. So, the margin is a certain amount of money, which is received by one side in the form of a guarantee that the other side fulfills the terms of the transaction. The basis of this concept lies in the fact that if suddenly the margin payer turns out to be insolvent and cannot fulfill certain obligations undertaken, the party that accepted the margin will be able to pay off its open position using it. To put it another way, margin can be considered quite an important means of payment by which clearing companies can manage high risks in the field of stock trading.
Variation margin is a dailyprofit or loss on the account of the trader's futures contract. In other words, this is the financial result in monetary terms following the results of each trading session of the market.
In the case of profit, variation marginhas a positive value, and if a trader has a loss, then this indicator has a negative value and the amount received will be debited from the account according to the results of clearing.
The main difference between futures and stock transactions- in terms of receipt of funds to the account. Thus, in futures transactions, money is debited or received every day, regardless of the actual sale, while for shares, money will be credited to the account only at the time of their sale.
Let's try to figure out a specific example.The cost of one share of the company is 200 rubles. and the trader buys it for the same 200 rubles. The share price has increased to 220 rubles, but until the share is sold, the profit will not go to the account.
Now another variant of operations with the same shares.- futures operations, with the help of which we will see the calculation of the margin itself. The trader purchased one futures on the shares of the same company at the moment when their price on the securities market was 200 rubles. The cost of this futures will be 20,000 rubles. (each futures contract includes the value of 100 shares). In order to become the owner of one futures, the trader is obliged to make a guarantee in the amount of 12% of 20,000 rubles. or 2400 rub. The results of such a deal are summarized every day For example, at the end of the first day the stock price increased to 220 rubles. Accordingly, the value of the futures rises to 22,000 rubles. Positive difference in 2000 rubles. credited to the trading futures account, despite the fact that the position is not yet closed and the futures are not sold. Such a difference is the variation margin, and a positive one.
Calculating variation margin the next daycarried out on the basis of the futures price of 22,000 rubles. If the market closes on the share price of 21,300 rubles on this day, then this will be a decrease of 700 rubles in comparison with the previous day, which will be written off from the futures account. Thus, the trader receives a negative variation margin.
As you can see from the above example, the mainthe display of the result from trades in futures trading is the variation margin, the definition of which in itself reflects a positive point when it is used. This is the receipt of profit regardless of the fact of the sale of the futures, as opposed to securities transactions in the stock market.
However, there are some downsides to applying this.futures trading instrument. This is the probability of permanently writing off the negative margin until the end of the funds in the account with the trader in the event that the stock price moves to a losing side. Therefore, to keep the futures in the broker will need to deposit additional money into the account, otherwise this position may be forcibly closed, which will bring some losses to the trader.
In the stock market of securities, such situations do not arise because when they are bought the full value of the package of shares is paid, and not 12% of the collateral, as in futures transactions.
Variation margin on various futurescontracts are calculated based on the official algorithms given in the specification of these futures. The specification is an exchange document containing the basic parameters of the contract. This is where the percentage of the value of the equity package of collateral is negotiated.
