Exposure margin on Zerodha
Exposure margin is the fixed-percentage buffer added on top of SPAN margin for F&O positions on Indian exchanges. It is calculated as a defined percentage of the notional contract value and exists to cover scenarios beyond SPAN’s standard stress tests.
Rate by contract type
The exposure margin rate varies by contract:
| Contract type | Exposure margin (approximate) |
|---|---|
| Index futures | 3% of notional value |
| Stock futures | 5% of notional |
| Index options | 3-5% of notional (varies) |
| Stock options | 5-7% of notional |
| Currency futures | 1-2% |
| Commodity futures (per MCX) | 4-7% |
These are set by the exchange and may revise periodically.
What exposure margin covers
| Coverage | Detail |
|---|---|
| Buffer beyond SPAN | Worst-case beyond the 16 scenarios |
| Operational risk | Settlement and clearing buffer |
| Liquidity risk | Mark-to-market gap |
| Conservative margin layer | Overall safety overlay |
Exposure is the “safety overlay” on top of SPAN.
SPAN vs Exposure
| Aspect | SPAN | Exposure |
|---|---|---|
| Calculation | Worst-case across 16 scenarios | Fixed % of notional |
| Portfolio-aware | Yes | No (per-contract) |
| Daily refresh | Yes | Static (rate set by exchange) |
| Hedge benefit | Yes | No |
| Magnitude | Variable (depends on volatility) | Predictable |
Together they form the initial margin: SPAN + Exposure.
Difference from ELM
ELM (Extreme Loss Margin ) is sometimes considered a subset of “Exposure margin” in different exchange frameworks. The terminology varies:
- NSE Clearing: “Exposure” includes the ELM component.
- BSE / MCX: “ELM” is sometimes called out separately.
For practical purposes, Zerodha’s margin calculator shows the combined SPAN + Exposure as the initial margin.
Hedge benefit and exposure
Exposure margin is per-contract; hedged positions don’t get exposure reduction the way they get SPAN reduction.
For an iron condor (4 legs):
- Total exposure = sum of exposure for each leg.
- Total SPAN = (sum of standalone SPAN) - hedge benefit.
The combined initial margin = (combined SPAN with hedge benefit) + (sum of exposure for all legs).
Currency exposure
Currency derivatives have lower exposure margin (1-2%) because:
- Lower volatility than equity.
- More transparent global pricing.
- Smaller idiosyncratic risk.
This is why currency leverage is higher than equity F&O leverage.
How retail traders should think about it
- Exposure is predictable. You can estimate it from the contract notional.
- It scales with notional, not with risk. A short option’s exposure is the same as a long option for the same contract (different SPANs).
- It reduces leverage. Higher exposure means lower leverage; less efficient capital usage.
For strategic planning:
- Multi-leg strategies have proportionally higher exposure margin (sum of legs).
- Hedge benefit applies to SPAN only.
- For pure leverage maximisation, single-contract trades are slightly more efficient than spreads (but with more risk).
Recent changes
The exposure margin rates were revised in 2024 alongside other F&O framework changes . The trend has been slightly higher exposure margins to discourage retail F&O leverage.
See also
- SPAN margin on Zerodha
- Exchange margin types (SPAN, ELM, Adhoc, VAR)
- ELM (Extreme Loss Margin) on Zerodha
- VAR + ELM intraday margin on Zerodha
- SPAN and exposure margin on Kite
- Zerodha margin calculator
- Margin required on order window
- Margin available / used / cash on Kite funds
- Margins and leverage at Zerodha
- Hedged positions margin benefit on Zerodha
- Naked option selling margin on Zerodha
- Cash component vs collateral component
- 50:50 cash collateral rule explained
- SEBI peak margin rules explained
- Upfront margin requirements post-2020
- SEBI margin pledge rules September 2020
- Margin shortfall and auto-square-off
- Margin pledge (Zerodha)
- Margin haircut
- Margin on exit calculation
- Delivery margin field on Kite
- Settlement (F&O)
- Lot size revision F&O 2024
- Intraday leverages for MIS / CO
- Intraday margin increases on volatile days
- Futures and options
- Zerodha
- Kite (Zerodha)
- Kite Positions tab explained
External references
References
- NSE Clearing, Exposure margin and overall margin framework, nseclearing.com.
- SEBI, F&O margin framework, sebi.gov.in.
- Zerodha, Margin policies, zerodha.com.