Commodity derivatives energy futures margin crude oil margin natural gas margin SPAN margin peak margin MCX Zerodha

Energy futures margins on Zerodha

From WebNotes, a public knowledge base. Last updated 21 June 2026. Reading time ~13 min.

Key facts

Exchange	Multi Commodity Exchange of India (MCX), SEBI-regulated
Margin layers	SPAN initial margin plus exposure margin plus extreme loss margin (ELM)
Exposure margin	Generally about 2 per cent of contract value on commodity futures
ELM on futures	1.25 per cent of the open futures position
Crude oil margin (approx.)	Around Rs 35,000 to 55,000 per standard lot, varying with volatility
Peak margin	Full margin required upfront; no intraday leverage above the overnight figure
Why higher	Energy contracts carry high SPAN add-ons because crude and gas are among the most volatile commodities

Energy futures margins on Zerodha are the upfront capital the Multi Commodity Exchange of India, a SEBI-regulated commodity exchange, requires to hold a crude oil or natural gas futures position, and they run higher than most other commodities because crude and gas are among the most volatile contracts traded. The total margin is the sum of three layers, the SPAN initial margin, the exposure margin, and the extreme loss margin, all computed by the exchange and shown in the Zerodha margin calculator once the commodity segment is active on Kite .

The reason energy margins deserve their own treatment is the volatility. Crude oil futures move on OPEC+ production decisions, the weekly US inventory report, and geopolitical events in producing regions; natural gas futures move on US weather forecasts and the weekly storage report. Both can move several per cent in a single session. SEBI’s margin methodology raises the initial margin as scanned volatility rises, so the energy contracts carry larger add-ons than a calmer commodity, and the exchange can revise the parameters intraday around the high-impact data releases. This article sets out each margin layer, the volatility add-on, the difference between intraday and overnight margin, and the SEBI peak-margin rule that removed the old intraday leverage.

Conflict-of-interest disclosure. This article is published by the WebNotes Editorial Team for informational purposes and is written independently. WebNotes operates a Zerodha account-opening referral programme, disclosed on the pages that carry the referral link; this article does not carry it and earns no referral commission from anything described here. All figures cite publicly available MCX and SEBI documentation and may change; verify current specifications before trading.

The three margin layers

The total margin on a commodity future is the sum of three components, each covering a different slice of risk. They apply to crude oil and natural gas as to every other MCX future, but the energy contracts produce larger numbers because each layer scales with volatility or contract value.

SPAN margin is the exchange’s initial margin, computed under the Standard Portfolio Analysis of Risk methodology. SPAN evaluates the one-day risk of a position across a grid of scenarios, the risk array, that vary the underlying price and the volatility and reduce time to expiry, and takes the worst-case loss across that grid as the margin. Because the array scans larger price moves on a volatile contract, the SPAN figure on crude oil and natural gas is proportionately larger than on a low-volatility commodity. The full mechanics are in SPAN margin on Zerodha .

Exposure margin is an additional buffer levied over SPAN to protect against moves beyond the SPAN scan and against the broker’s liability in volatile conditions. On commodity futures it is generally about 2 per cent of the contract value. The detail is in exposure margin on Zerodha .

Extreme loss margin (ELM) covers loss-making moves beyond the coverage of the SPAN initial margin. It is levied at 1.25 per cent of the open futures position. For options the ELM is 1 per cent of the open position.

The total margin a trader sees on Kite or in the margin calculator is SPAN plus exposure plus ELM. There is no separate fourth charge for ordinary positions, though the exchange can impose additional or special margins on specific contracts during stress.

Why energy margins are higher

The energy contracts carry the larger margins because the volatility input to SPAN is higher and because the exchange adds margin around predictable high-impact events.

Crude oil margin runs around Rs 35,000 to 55,000 per standard 100-barrel lot under ordinary conditions, with the figure rising in high-volatility periods. Natural gas margins scale to its lot value and volatility, with the mini contract (250 mmBtu) at roughly one-fifth of the standard contract (1,250 mmBtu). These figures are illustrative and move with the price and the exchange’s SPAN parameters; the live figure on the calculator is the binding one.

The add-ons cluster around the data calendar:

US crude inventory data. The US Energy Information Administration releases the Weekly Petroleum Status Report every Wednesday at roughly 8:00 PM IST. A surprise against the consensus can move crude oil Rs 200 to 400 per barrel in minutes.
US natural gas storage data. The EIA Natural Gas Storage Report prints every Thursday at roughly 8:00 PM IST and routinely moves Henry Hub, and MCX natural gas with it, several per cent in a tick burst.
OPEC+ decisions. Production-quota announcements gap crude oil at the session open and trigger intraday margin revisions.
Geopolitical events. Supply disruptions in producing regions spike both crude and gas without warning.

Ahead of and during these events the exchange can revise SPAN parameters intraday, so a position that was adequately margined in the afternoon can fall short after a mid-session revision, producing a margin call or an automatic square-off. A trader carrying an energy position through the Wednesday or Thursday EIA release without a margin buffer is the recurring failure mode.

Intraday versus overnight margin

There is no longer a leverage gap between intraday and overnight on energy futures. Before SEBI’s peak-margin framework, brokers offered higher intraday leverage on MIS positions, so an intraday crude oil trade needed a fraction of the overnight margin. That is gone.

SEBI’s peak-margin rules, phased in through 2020 and 2021, require the full upfront margin, the SPAN plus exposure, for both intraday (MIS) and overnight (NRML) positions. The same margin is needed to take a crude oil position for ten minutes as to carry it overnight. The practical consequence is that a retail trader cannot take an oversized intraday energy position on thin capital; the position is sized by the full margin from the moment it is opened.

The remaining MIS-versus-NRML difference is in the auto-square-off, not the margin. An MIS energy position is squared off by Zerodha’s risk desk before the MCX session close, typically in the 11:00 to 11:20 PM IST window ahead of the 11:30 PM close, while an NRML position is carried overnight. The margin to enter is the same either way.

Peak margin

Peak margin is the SEBI rule that turned the upfront-margin requirement into an all-day obligation. Under the framework, the full margin must be available not only when the position is opened but throughout the day, verified through random intraday snapshots taken by the clearing corporation. The peak-margin requirement is the highest margin obligation captured across those snapshots.

A shortfall against the peak-margin requirement attracts a penalty, levied by the exchange and passed to the client. For an energy trader this means a position must be fully funded the whole time it is open; a trader cannot run a position that is adequately margined on average but falls short at a snapshot moment. The interaction with hedged positions, where a hedge reduces the peak-margin obligation, is covered in peak margin on hedged positions , and the penalty mechanics in peak margin penalty .

The peak-margin regime makes the volatility add-ons on energy contracts more consequential. When the exchange raises the SPAN parameter intraday around an EIA release, the peak-margin requirement rises with it, and a position that was funded for the morning’s requirement can breach the afternoon’s snapshot.

Worked margin picture

Putting the layers together for a single standard crude oil lot at an illustrative price level:

Layer	Basis	Illustrative figure per lot
SPAN	Exchange risk array, volatility-driven	Rs 28,000 to 38,000
Exposure	About 2 per cent of contract value	Rs 8,000 to 14,000
Extreme loss margin	1.25 per cent of open position	Included in the exchange total
Total	SPAN plus exposure plus ELM	Rs 36,000 to 52,000

The figures move with the crude price and volatility; the calculator figure is the one to trade against. The procedural walkthrough for placing and managing a crude oil position is in how to trade crude oil futures on MCX via Zerodha , and the SPAN computation in how to calculate SPAN margin on Zerodha .

Margin shortfall and square-off

If adverse mark-to-market depletes the available margin on an open energy position, Zerodha’s risk desk can square it off without prior notice. The sequence is: the daily MTM debits the loss to the ledger, the available margin falls, and if it falls below the maintenance requirement the position is liable for square-off. On a volatile energy contract this can happen fast, because a Rs 300 per barrel move on a 100-barrel crude lot is a Rs 30,000 swing. The defence is a margin buffer above the bare requirement, sized to absorb the kind of intraday move the contract routinely makes, not the minimum the calculator shows.

Options margins differ

The above applies to energy futures. Energy option writers pay futures-level SPAN plus exposure margin to sell an option, far above the premium, while option buyers pay only the premium until an in-the-money option devolves into a future at expiry, at which point futures-level margin is required. The devolvement mechanic and the option-seller margin are covered in commodity options on Zerodha and naked option selling margin on Zerodha .

External references

References

SEBI Circular SEBI/HO/CDMRD/DMP/CIR/P/2021/020, Margining framework for commodity derivatives, Securities and Exchange Board of India.
SEBI Circular on Peak Margin reporting, SEBI/HO/MIRSD/DOP/CIR/P/2020/127 dated 20 July 2020, Securities and Exchange Board of India.
MCX Risk Management and Margining circulars, Multi Commodity Exchange of India Ltd, mcxindia.com.
SEBI Master Circular for Commodity Derivatives, Securities and Exchange Board of India.
US Energy Information Administration, Weekly Petroleum Status Report and Natural Gas Storage Report methodology, eia.gov.

Frequently asked questions

What margin do I need to trade crude oil futures on Zerodha?

A standard MCX crude oil lot (100 barrels) needs roughly Rs 35,000 to 55,000 of total margin, the sum of SPAN, exposure, and extreme loss margin. The figure varies with the crude price and volatility; check the live number on the Zerodha margin calculator before trading.

Why are energy futures margins higher than other commodities?

Crude oil and natural gas are among the most volatile commodities. The SPAN margin rises with scanned volatility, so the energy contracts carry larger SPAN add-ons, and the exchange raises margins further around inventory reports, OPEC meetings, and geopolitical events.

Is the intraday margin lower than the overnight margin on MCX?

No. SEBI’s peak-margin framework removed intraday leverage. The same SPAN plus exposure margin is required for an MIS intraday energy trade as for an NRML overnight trade, so a crude oil or natural gas position cannot be taken on a thin intraday margin.

What is peak margin on MCX energy futures?

Peak margin is SEBI’s rule that the full upfront margin must be available throughout the day, verified through random intraday snapshots. A shortfall against the peak-margin requirement attracts a penalty, so an energy position must be fully funded the whole time it is open.

What are the components of energy futures margin?

Three layers: SPAN initial margin computed from the exchange risk array, exposure margin of about 2 per cent of contract value as an additional buffer, and extreme loss margin of 1.25 per cent on the open futures position to cover moves beyond the SPAN scan range.

Do margins change during the trading day on energy contracts?

Yes. The exchange can revise SPAN parameters intraday on energy contracts, especially around the weekly US inventory reports and OPEC announcements. A position that was adequately margined can fall short after a mid-session SPAN revision, triggering a margin call or square-off.

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 21 June 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.