SPAN Margin
SPAN — Standard Portfolio Analysis of Risk — is a risk-based margin system developed by the Chicago Mercantile Exchange in 1988 and adopted by Indian exchanges for F&O. Instead of using a flat percentage, SPAN simulates how a portfolio would perform under multiple market scenarios and asks for the worst-case loss as upfront margin. It is the larger of the two margin components in Indian derivatives, the other being Exposure margin.
Key takeaways:
- SPAN margin is the risk-based component of F&O margin in India.
- It runs scenarios over price and volatility moves and picks the worst-case loss.
- SPAN recognises hedges; spread positions get lower margin than naked ones.
- Updated daily by NSE Clearing and ICCL based on market parameters.
- You can estimate SPAN using the exchange-provided SPAN calculator.
How SPAN works under the hood
SPAN considers 16 standard risk scenarios on each futures and options portfolio:
- Seven scenarios cover price up and down moves of varying magnitudes.
- Two scenarios cover extreme price up and down moves.
- Volatility up and down moves are layered on each.
- The worst total loss across these scenarios is the SPAN margin.
This approach captures the true risk of the portfolio rather than just notional value.
Inputs that affect SPAN
| Input | Why it matters |
|---|---|
| Price scan range | Maximum expected price move; set by NSE Clearing |
| Volatility scan range | Implied volatility change considered in scenarios |
| Inter-month spread credit | Recognises offset between near and far expiries |
| Intra-spread offsets | Used for calendar and butterfly strategies |
SPAN for typical positions
- Long Nifty futures (1 lot): SPAN around ₹70,000 (varies with index level and VIX).
- Bank Nifty calendar spread: SPAN drops sharply because the two legs offset.
- Sold ATM call: SPAN reflects unlimited upside risk; typically 6–8% of contract value.
- Iron condor or butterfly: Heavily reduced margin due to capped risk.
Exposure margin on top of SPAN
The total upfront margin in F&O is SPAN + Exposure. Exposure margin is an additional buffer (around 1.5–5% depending on the segment) that protects the clearing corporation against tail events not captured by SPAN. Margin pledge counts towards both components, subject to the 50% cash rule.
How to estimate SPAN before you trade
NSE provides a free SPAN calculator that lets you plug in your positions and see the margin requirement. Most brokers, including Lemonn, replicate this in their margin calculator screens. Run it before opening a new position to avoid margin call surprises.
SPAN in practice — a tip
SPAN is dynamic. A sudden jump in VIX increases scenario losses and hence margin. Even if your position size is unchanged, you may see a higher margin requirement after a volatile day. Always keep a buffer to absorb these increases without triggering broker square offs.
Frequently asked questions
Is SPAN the same on NSE and BSE?
The methodology is identical; parameters are calibrated to each exchange’s contracts and may differ slightly.
Why does my SPAN change after a market move?
New scenarios reflect new prices and volatility. Margin is recalculated continuously by the exchange.
Can I get margin benefits from hedged positions?
Yes, that is one of SPAN’s strengths. Hedged trades like spreads and iron condors have much lower margin.
Is SPAN applied to currency and commodity F&O?
Yes, both segments use SPAN with their own parameters.
