SPAN Margin
The scenario-based core component of initial margin, set by NSE's risk engine to cover the worst plausible single-day loss on your F&O book.
Definition
SPAN margin — short for Standard Portfolio Analysis of Risk — is the primary component of the initial margin required to carry a futures or short option position on Indian exchanges. Developed by the Chicago Mercantile Exchange and adopted by NSE and BSE, SPAN uses a risk-array methodology: it applies a grid of hypothetical price and volatility moves to your positions and calculates the portfolio P&L under each scenario. The single largest projected loss across all scenarios becomes your SPAN margin requirement. Unlike a flat percentage rule, SPAN is dynamic — it reflects changing market conditions because NSE publishes updated parameter files several times a day.
Why it matters
SPAN margin is the dominant number in any margin calculation for F&O traders in India. For index futures (Nifty, Bank Nifty, FinNifty, MidcpNifty), SPAN can move significantly during volatile sessions — sometimes expanding by 20–30% in a matter of hours if implied volatility spikes. This has two practical consequences. First, a position that was adequately funded at the open can create a margin shortfall by afternoon without any deliberate action on the trader's part. Second, because SPAN nets risk across the portfolio, adding a hedge in the opposite direction (say, buying a put against a short future) can reduce SPAN by more than the hedge's own standalone margin, making certain multi-leg structures genuinely capital-efficient. Brokers are required to collect at least the exchange-mandated SPAN; many collect 100% upfront plus an additional buffer.
Formula
SPAN runs 16 scenarios defined by combinations of:
Price change: 0, ±1/3, ±2/3, ±3/3 of the scanning range (typically 3 standard deviations)
Volatility shift: up or down by a fixed percentage
The risk array value for a position is its P&L under each scenario. SPAN margin = maximum loss across all 16 scenario sums for the entire portfolio.
Example
Suppose you hold one short lot of Bank Nifty futures (hypothetical lot size 15). The exchange's current scanning range implies a one-day adverse move equivalent to roughly Rs 60,000 at the current notional. SPAN might be set at around Rs 50,000–65,000, calibrated to cover that move with a defined confidence level. If implied volatility rises sharply the next morning — say, ahead of an RBI policy announcement — the exchange publishes new parameters and your SPAN requirement could jump to Rs 75,000. Your broker's system will alert you to the shortfall and require a top-up before the position can be maintained.
Know your margin before placing the trade
Use TradePulse's live option chain to assess open interest and volatility conditions that drive SPAN requirements.