SPAN Margin

SPAN Margin

SPAN margin is the SEBI-required initial collateral on futures and options, calculated by NSE's portfolio-level system using simulated worst-case price-and-volatility moves.


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In summary

SPAN margin is the minimum collateral NSE Clearing requires from a trader to cover the worst-case one-day loss on a derivatives portfolio. It is calculated daily using 16 risk scenarios and covers 99% value at risk over a one-day time horizon.


  • SPAN margin applies to futures positions and short options positions — not options buying
  • Total margin required = SPAN margin + Exposure margin
  • For index futures and index options: exposure margin is 3% of the notional contract value
  • For individual stock futures and short options: exposure margin is the higher of 5% or 1.5 standard deviations of the notional value
  • SPAN margin changes daily — NSE Clearing publishes updated Risk Parameter files each trading day
  • Pledged shares held in a demat account can be used to meet margin requirements, subject to applicable haircuts and SEBI guidelines
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What is SPAN margin and how does it work in 2026?

Why is operating profit margin important?
 

Why is operating profit margin important?

SPAN stands for Standard Portfolio Analysis of Risk. The system was originally developed by the Chicago Mercantile Exchange (CME) and adopted by NSE Clearing in India to calculate risk-based margin requirements for all derivative positions in the F&O segment.


The core principle of SPAN is straightforward. Rather than applying a fixed percentage margin to every position, SPAN calculates the largest loss a portfolio could reasonably suffer over a single trading day. The margin requirement is then set at a level sufficient to cover that worst-case loss.


SPAN treats futures and options contracts uniformly while recognising the unique risk characteristics of options portfolios — including deep out-of-the-money short positions, inter-month risk, and spread positions across contract months. Three factors directly affect the value of a derivatives position and are central to SPAN's calculations:


  • Underlying price: How much the price of the index or stock might move
  • Implied volatility: How much the market expects price to fluctuate going forward
  • Time to expiry: How much time value remains in the options contract
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How does NSE calculate SPAN margin?

NSE Clearing calculates SPAN margin through a scenario-based methodology. The process works as follows:


Step 1 — Construct 16 risk scenarios:
SPAN generates 16 different scenarios of probable changes in the underlying asset's price and implied volatility. These scenarios combine upward and downward price moves with increases and decreases in volatility — covering a wide range of possible market conditions.


Step 2 — Calculate the loss under each scenario:
For each of the 16 scenarios, SPAN calculates how much a specific position would gain or lose. These calculations are called Risk Arrays. NSE Clearing performs the complex option pricing calculations centrally and provides the results to brokers and members daily in a file called the SPAN Risk Parameter file.


Step 3 — Identify the largest loss — Scanning Risk Charge:
SPAN selects the single largest loss identified across all 16 scenarios. This worst-case outcome is called the Scanning Risk Charge and forms the primary component of the SPAN margin requirement.


Step 4 — Add additional charges:


SPAN adds two further charges to the Scanning Risk Charge:


  • Calendar Spread Charge: Applied to spread positions across different expiry months of the same underlying. Calculated based on the delta of the portfolio in each contract month.

  • Short Option Minimum Charge: A minimum margin applied to short options positions to cover the risk of deep out-of-the-money options that might move quickly if market conditions change sharply.


Step 5 — Set the final SPAN margin:


The total of the Scanning Risk Charge, Calendar Spread Charge, and Short Option Minimum Charge equals the SPAN margin requirement for that portfolio.


The price scan range — the magnitude of price move used in the scenarios — is set at 3.5 standard deviations (3.5 sigma) of the daily logarithmic returns of the underlying, scaled by the Margin Period of Risk (MPOR), subject to applicable minimum margin percentages.

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SPAN margin vs exposure margin — components and differences in 2026

Total initial margin for an F&O position has two components — SPAN margin and Exposure margin. Both must be deposited upfront before a position can be held.


ParameterSPAN marginExposure margin
What it coversWorst-case one-day portfolio loss across 16 risk scenariosResidual risk not captured by SPAN — extreme events, gap openings
How it is calculatedScenario-based — 16 price and volatility scenariosFixed percentage of notional contract value
For index futures and index optionsScenario-based (typically 5–10% of contract value)3% of notional contract value
For individual stock futures and short optionsScenario-basedHigher of 5% or 1.5 standard deviations of notional value
Does it change dailyYes — recalculated with each SPAN Risk Parameter fileYes — changes with contract value
Applied to options buyingNoNo
Applied to short optionsYesYes
Applied to futuresYesYes

Key distinction: SPAN margin is dynamic and scenario-driven  it reflects the actual risk profile of the specific portfolio. Exposure margin is a simpler, percentage-based additional buffer. Together they form the total initial margin that NSE Clearing requires from every trader holding an open derivatives position.

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SPAN margin calculator — working example for Nifty futures in 2026

The following example illustrates how SPAN and exposure margin combine to determine the total margin requirement for a Nifty 50 futures position. Figures are illustrative and based on typical market conditions — actual margin requirements change daily.


Assumed inputs:

  • Contract: Nifty 50 futures (near month)
  • Nifty level: 24,500
  • Lot size: 75 units

  • Notional contract value: 24,500 × 75 = ₹ 18,37,500


SPAN margin calculation:
SPAN margin is set to cover the worst-case one-day loss at 99% value at risk. For a Nifty futures contract, this typically falls in the range of 5% to 10% of the notional contract value, depending on current volatility conditions.

  • Assumed SPAN margin rate: 6% of notional value

  • SPAN margin = 6% × ₹ 18,37,500 = ₹ 1,10,250


Exposure margin calculation:
For index futures, exposure margin is 3% of the notional contract value.

  • Exposure margin = 3% × ₹ 18,37,500 = ₹ 55,125


Total initial margin required:

  • Total margin = SPAN margin + Exposure margin

  • Total margin = ₹ 1,10,250 + ₹ 55,125 = ₹ 1,65,375


This means a trader holding one lot of Nifty futures must have approximately ₹ 1,65,375 available as margin — before any mark-to-market settlement obligations.


The securities quoted are for example purposes only and not a recommendation. Actual margin requirements vary daily based on NSE Clearing's published SPAN Risk Parameter files.

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Positional trading and SPAN margin in 2026

Positional trading refers to holding derivative positions — futures or short options — overnight or across multiple trading sessions, as opposed to squaring off all positions within the same trading day.


SPAN margin is directly relevant to positional traders because it must be maintained continuously for the duration of any open overnight position. The key points every positional trader needs to understand about SPAN margin are:


  • Margin is recalculated daily: NSE Clearing releases updated SPAN Risk Parameter files each trading day. A position that required ₹ 1,65,000 in margin yesterday may require more or less today depending on how volatility and the underlying price have moved.
  • Mark-to-market settlements: For futures positions, mark-to-market (MTM) losses are settled daily in cash. If the market moves against a position, the MTM loss is debited from the margin account. If the margin balance falls below the minimum required level, a margin call is issued — requiring the trader to add funds immediately.
  • Hedged positions attract lower SPAN margin: SPAN is a portfolio-based system. A trader holding both a long futures position and a short options position on the same underlying may benefit from reduced SPAN margin, because the offsetting positions reduce the overall worst-case loss the portfolio could suffer.

  • Collateral eligibility: Pledged securities — shares held in a demat account and pledged to the broker — can be used to meet margin requirements, subject to applicable haircuts as determined by SEBI guidelines. Cash and cash equivalents are typically required to meet at least a minimum percentage of the total margin obligation.


Who SPAN margin applies to and who it does not:

Position typeSPAN margin applicable
Long futuresYes
Short futuresYes
Short call optionsYes
Short put optionsYes
Long call options (buying)No
Long put options (buying)No

Options buyers pay only the premium upfront — they face no SPAN or exposure margin obligation because their maximum loss is already limited to the premium paid.

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Conclusion

SPAN margin is NSE Clearing's risk-based collateral system for the F&O segment — calculated daily using 16 market scenarios to cover the worst-case one-day loss at 99% value at risk. The total initial margin a trader must deposit equals the SPAN margin plus the exposure margin. SPAN applies to futures and short options positions — not to options buying. Because SPAN is recalculated every trading day using updated Risk Parameter files, the margin requirement for the same position can change from one session to the next. Understanding how SPAN margin is calculated — and how it combines with exposure margin to determine total obligations — is foundational knowledge for anyone holding overnight derivative positions.

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Frequently Asked Questions

SPAN Margin

Does SPAN margin differ between NSE and BSE for the same trade?

Yes — SPAN margin can differ between NSE and BSE for the same underlying contract because each exchange runs its own SPAN calculation using its own Risk Parameter files, volatility inputs, and scenario assumptions. NSE Clearing and BSE Clearing operate independently. In practice, the difference is typically small for liquid index contracts like Nifty and Sensex, but it can be more pronounced for individual stock derivatives where liquidity and volatility profiles differ between the two exchanges.

Does SPAN margin change daily for the same contract?

Yes. NSE Clearing releases updated SPAN Risk Parameter files every trading day. The SPAN margin for the same contract — for example, one lot of Nifty futures — can change from session to session based on shifts in implied volatility, changes in the underlying price level, and updates to the price scan range. A position that requires ₹ 1,65,000 in margin today may require a different amount tomorrow. Traders holding overnight positions must monitor their margin balance daily.

Can shares pledged with the broker be used for SPAN margin?

Yes — shares held in a demat account and pledged to the broker can be used to meet margin requirements in the F&O segment, subject to applicable haircuts as specified by SEBI. The haircut reduces the effective collateral value of the pledged shares — a share with a 20% haircut provides ₹ 80,000 of margin value for every ₹ 1,00,000 of market value pledged. SEBI guidelines also specify that a minimum percentage of the total margin obligation must be met in cash or cash equivalents — the exact percentage is governed by current regulatory requirements.

Is SPAN margin charged on options buying?

No. SPAN margin and exposure margin apply only to futures positions and short options positions — not to options buying. An options buyer pays only the premium upfront to acquire the contract. Because the buyer's maximum loss is already capped at the premium paid, no additional margin is required. SPAN margin obligations arise only when a trader is on the selling side of an options contract, where the potential loss is open-ended or significantly larger than the premium received.

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Investments in the securities market are subject to market risk, read all related documents carefully before investing.

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