Lot size, margin and leverage

There is a specific moment where new F&O traders lose control of their risk, and it is almost never the moment they think.

It is not the entry. It is a few seconds earlier, when they looked at a premium of ₹150 and formed a mental picture of a ₹150 position.

Three different numbers#

Every F&O position has three sizes, and they are wildly different:

That third row is the one people skip. Buying one lot of a 24,000-strike Nifty option gives you exposure to eighteen lakh rupees of index, for an outlay of eleven thousand.

This is leverage. It is the entire reason F&O exists, and the entire reason it damages accounts.

Lot size#

You cannot buy one unit of an index derivative. Contracts trade in fixed lots, set by the exchange.

Lot size does two things at once, and only the first is obvious:

1. It multiplies your cost. A ₹150 premium is a ₹11,250 position at a lot size of 75.
2. It multiplies every price move. Each ₹1 move in the premium is ₹75 to you.

The second one is where the surprise lives. A premium moving from ₹150 to ₹110 is a perfectly ordinary intraday move — options are volatile, that is what they are. It is also ₹3,000 gone. On a position you mentally filed as "₹150".

Lot sizes are not fixed forever. SEBI and the exchanges revise them to keep contract values inside a target band, and revisions have been substantial. Every lot size in these lessons is an illustration. Check the live contract specification on the NSE site before you trade.

Margin: futures and selling#

Buying an option is simple: you pay the premium, and that is the most you can lose. No margin, no calls, no surprises on that side.

Futures and short options are different. You do not pay the full contract value — you post margin, a good-faith deposit against your obligation. That margin has two parts:

• SPAN margin — the exchange's estimate of the worst plausible one-day loss on your position
• Exposure margin — an additional buffer on top

Together they typically run somewhere in the region of 15–25% of contract value for index futures, but the number is set by the exchange, varies with volatility, and your broker may require more. Treat any percentage you read, including that one, as an approximation to verify rather than a fact.

Margin calls#

When your position moves against you, your margin is eaten into. Fall below the required level and you get a margin call: post more funds, or have positions closed.

The timing is the cruel part. Margin calls arrive precisely when the market is moving hardest against you — which is often the worst possible moment to be forced out, and frequently near a short-term extreme.

A margin call is not a warning that arrives in time to be useful. It is a consequence that has already happened.

What leverage actually does#

Leverage is usually described as amplifying gains and losses. True, but it undersells the real effect.

Leverage compresses time. Without it, a bad position is a slow problem — you have days or weeks to be wrong before it matters. With it, being wrong for two hours can be terminal.

That compression is what breaks people. Not the arithmetic — the fact that there is no longer room to be wrong, reconsider, and recover. Every decision has to be right sooner.

Work out what a position really costs you#

The calculator below turns these three numbers into the only one that matters: how many lots you can take without breaking your own risk rule.

Set capital to ₹2,00,000 and leave the defaults. It returns zero lots — because one lot of that trade risks ₹4,500, which is 2.3% of the account, against a 1% rule.

That is not the calculator being difficult. That is the honest answer to "can this account trade this instrument at this stop?" — and the answer is no.