What is ELM margin?

ELM Margin (Extreme Loss Margin) is a margin collected by exchanges to cover potential losses due to extreme price volatility or unexpected market conditions. It is calculated as a percentage of the trade value to safeguard market integrity and mitigate counterparty risk.

As per exchange regulations, ELM margin is applicable for expiry contracts to manage heightened risks. In Flattrade, a 2% ELM is imposed one day before the expiry of the contract, in line with our RMS (Risk Management System) policy.

Example: (Calculation: Strike Price × Lot Size × 2%)

For a short position in a Nifty 25,000 call option with a margin of Rs.1 lakh, an additional margin of Rs.37,500 will be required on the expiry day.