SPAN Margin
The portion of initial margin computed by simulating a portfolio's worst-case loss across a grid of price and volatility scenarios.
Formula
SPAN Margin = the largest loss the portfolio would suffer across the scenario array tested by the clearing corporation
Unit
₹
In depth
SPAN is a portfolio-based system, which means it recognises offsetting positions: a hedged spread requires far less margin than the sum of its two legs, because the scenarios that hurt one leg help the other. The exposure margin is added on top as an additional buffer against gap risk that the scenario grid may not capture. Because the calculation includes volatility scenarios, margin requirements rise when implied volatility rises, independently of any price move. A trader whose margin requirement jumped overnight without the position changing has usually met this feature rather than an error.
Worked example
Two Nifty futures lots outright might require about ₹2,30,000 of margin. The same two lots as a calendar spread, long one expiry and short another, might require under ₹40,000 — the offset is what SPAN recognises.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “SPAN Margin” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.