What is margin in futures and options?

Margin is the amount of money you need to set aside as collateral to open and hold a futures or F&O options-selling position, and it’s not the full contract value, it’s a fraction of it, which is what creates leverage in derivatives trading. Margin typically has two main components: SPAN margin, calculated by the exchange’s risk system based on the contract’s volatility and your position, and exposure margin, an additional buffer on top of SPAN. For option buyers, there’s no margin requirement in the same sense, since you simply pay the full premium upfront and your maximum loss is capped at that amount. Margin requirements can change during the day based on market volatility, and if your available margin falls short of what’s required for an existing position (due to adverse price movement), you can face a margin call or even forced square-off of the position by the broker.