VAR + ELM intraday margin on Zerodha
VAR + ELM is the margin framework applied to equity intraday (cash segment) trades on Zerodha (and any Indian broker). For F&O, SPAN + Exposure is the framework; for equity cash, it’s VAR + ELM.
VAR (Value at Risk)
VAR is the volatility-based margin component per scrip:
- Scrip-specific historical volatility.
- 99% confidence interval.
- 1-day horizon.
- VAR margin = price level x VAR factor.
For a Rs 100 large-cap scrip with 1.5% daily volatility, VAR might be ~9% of notional.
ELM (Extreme Loss Margin)
For equity intraday: ELM is the additional buffer beyond VAR. Typically 2-3% of notional.
| Component | Approximate range |
|---|---|
| VAR | 9-15% for liquid large-caps |
| ELM | 2-5% |
| Total intraday margin | 11-20% (leverage 5-9x) |
Effective leverage
Intraday leverage for equity = 1 / (VAR + ELM ratio).
| Scrip type | Approximate intraday margin | Approximate leverage |
|---|---|---|
| Liquid large-cap | 12-15% | 6.5-8x |
| Mid-cap | 15-22% | 4.5-6.5x |
| Small-cap | 20-30%+ | 3-5x |
| Highly volatile / surveilled | 30-50% | 2-3x |
For a Rs 10,000 capital, you can trade Rs 60,000-80,000 of liquid large-cap intraday.
How Zerodha implements
Zerodha (and all Indian brokers) consume the exchange-published VAR + ELM file:
- Updated daily by NSE / BSE.
- Implemented in the order ticket margin calculator .
- Applied at order placement (upfront margin rule).
CNC vs MIS
- CNC (delivery): 100% margin required (no leverage); no VAR + ELM relevance.
- MIS (intraday): VAR + ELM applies; effective leverage 5-9x for large-caps.
Intraday margin can increase
The VAR file refreshes:
- End of trading day (most common).
- During severe volatility events.
If VAR rises during the session (post-refresh), open MIS positions’ margin requirement also rises. This can trigger margin shortfall for tight positions.
See Intraday margin increases on volatile days for more.
Pre-peak-margin vs post-peak-margin
Pre-2020: Brokers offered up to 20x intraday leverage via broker-extended credit on top of VAR + ELM.
Post-Phase-4 (Sep 2021): Only exchange VAR + ELM margin; no broker leverage.
Comparison with international
| Market | Intraday equity leverage |
|---|---|
| India (post-peak-margin) | 5-8x typical |
| US (FINRA) | 4x for pattern day traders |
| UK | Less common; brokers vary |
| Singapore | Similar to US |
India’s intraday leverage is comparable to international norms post the SEBI tightening.
See also
- SPAN margin on Zerodha
- Exposure margin on Zerodha
- ELM (Extreme Loss Margin) on Zerodha
- Exchange margin types (SPAN, ELM, Adhoc, VAR)
- SPAN and exposure margin on Kite
- Zerodha margin calculator
- Margin required on order window
- Margin available / used / cash on Kite funds
- Margins and leverage at Zerodha
- Intraday leverages for MIS / CO
- Intraday margin increases on volatile days
- Leverage indicator on Kite
- Leverage against available funds
- Leverage for delivery / carry-over positions
- Hedged positions margin benefit on Zerodha
- Naked option selling margin on Zerodha
- Cash component vs collateral component
- 50:50 cash collateral rule explained
- SEBI peak margin rules explained
- Upfront margin requirements post-2020
- Margin shortfall and auto-square-off
- Margin pledge (Zerodha)
- Margin haircut
- CNC product type
- MIS product type
- Cover order (Zerodha)
- Bracket order (Zerodha)
- Futures and options
- Zerodha
- Kite (Zerodha)
External references
References
- NSE Clearing, VAR + ELM methodology for equity intraday, nseclearing.com.
- SEBI, Equity intraday margin framework, sebi.gov.in.
- Zerodha, Margin policies, zerodha.com.