How to compute commodity margin on Zerodha

Commodity margin on MCX is computed using the SPAN (Standard Portfolio Analysis of Risk) methodology, the same framework used for equity futures and options on NSE. Understanding how to calculate margin accurately before placing a trade prevents the two most common failure modes on commodity derivatives: the RMS auto-squareoff from a margin shortfall, and the shock of a mid-session margin call after an exchange SPAN revision.

This guide covers the full computation workflow using Zerodha’s SPAN calculator, the variables that drive margin levels, cross-margining for hedged positions, and the role of CTT and other charges in the overall cost calculation.

What margin is required for MCX commodity futures

MCX requires two margin components from each market participant holding an open futures position:

1. SPAN margin (Initial margin)

SPAN margin is the minimum margin mandated by the exchange, computed using the SPAN algorithm developed by the Chicago Mercantile Exchange (CME) and adopted by MCX. SPAN simulates a range of price and volatility scenarios and computes the worst-case one-day loss on the portfolio. The exchange sets the SPAN parameters – called risk arrays and scanning ranges – based on historical and implied volatility of the underlying commodity.

SEBI circular SEBI/HO/CDMRD/DMP/CIR/P/2021/020 and MCX circulars specify the minimum initial margin levels for various commodity contracts, which are reviewed periodically.

2. Exposure margin

Exposure margin is an additional buffer over SPAN margin, charged to protect against the risk that the SPAN model underestimates a tail loss. For MCX commodity contracts, exposure margin is typically expressed as a percentage of the contract value or as a fixed amount per lot. It varies by commodity.

Total margin

Total margin = SPAN margin + Exposure margin

This is the minimum amount of funds that must be available in the trading account before a position is opened and while it is held. If the MTM loss on the position reduces available funds below the total margin requirement, Zerodha’s RMS will issue a margin shortfall alert and may proceed to squareoff.

MTM losses are debited daily

Unlike equity delivery positions, commodity futures positions are subject to daily MTM settlement. Each evening, the exchange computes the Daily Settlement Price (DSP) and debits or credits the difference from your ledger. This means:

• A position that is INR 10,000 in loss at end of day will have INR 10,000 debited from the account overnight.
• Your available margin the next morning is the previous night’s balance minus the MTM debit (or plus the MTM credit).
• If the debit depletes available margin below the SPAN requirement, you face a margin shortfall the following morning even if you did not take any new position.

Using the Zerodha SPAN margin calculator

Step 1: Open the calculator

Navigate to zerodha.com/margin-calculator/SPAN/ in any browser. No login is required. The page presents tabs for different exchanges and segments: NSE FO, NSE CDS (currency), MCX, and others.

Step 2: Select MCX and the commodity

Click the MCX tab. A dropdown labelled “Symbol” appears. Select the commodity you wish to trade. Zerodha uses MCX’s official contract names:

After selecting the commodity, choose the Expiry from the next dropdown. Select the same expiry as the contract you intend to trade.

Step 3: Enter the position

In the Net Qty field, enter the number of lots. Enter a positive number for a buy (long) position and a negative number for a sell (short) position. Click Add.

Example: to compute margin for 2 long lots of Gold Mini (June 2026 expiry), select “GOLD MINI”, select “26JUN”, enter Net Qty as 2, and click Add.

Step 4: Read the results

The results table shows:

For a position in Gold Mini at current prices (approx. INR 76,000 per 10g) with 2 lots:

• SPAN margin: approximately INR 8,000–12,000
• Exposure margin: approximately INR 1,500–3,000
• Total margin: approximately INR 9,500–15,000

These figures are illustrative. The actual figures change each time MCX publishes a new SPAN file (at least once daily, sometimes more).

Step 5: Add additional legs for a spread (optional)

If you are placing a calendar spread (long near-month, short next-month) or a commodity hedge (for example, long Crude Oil and short Natural Gas), add each leg as a separate row. The calculator aggregates the portfolio and computes the net SPAN margin, which will be lower than the sum of individual margins because SPAN recognises the partial offset between correlated positions.

Example calendar spread for Crude Oil:

• Row 1: CRUDE OIL, June expiry, Net Qty +1 (long)
• Row 2: CRUDE OIL, July expiry, Net Qty -1 (short)

The SPAN margin for the spread is substantially lower than 2x the single-contract margin because the spread position has much lower directional risk.

Step 6: Compare with available funds in Kite

Open Kite and navigate to Funds. The Available margin (or “Available funds” for the commodity segment) must exceed the Total margin shown in the calculator. Add a buffer of at least 15–20 percent to account for:

• Intraday price swings before EOD MTM settlement
• Intraday SPAN revisions by the exchange (possible during volatile sessions)
• Brokerage and charge deductions from the margin account

If available margin is insufficient, use Add funds in Kite to transfer via UPI, NEFT, or IMPS before placing the order.

Variables that affect commodity margin levels

Price level

SPAN margin for commodity contracts is typically expressed as a percentage of contract value. Therefore, as the price of the underlying commodity rises (for example, if crude oil moves from INR 6,000 to INR 8,000 per barrel), the absolute margin in rupees increases proportionally even if the SPAN percentage stays unchanged.

Volatility

The exchange uses historical volatility (HV) and implied volatility data to set SPAN scanning ranges. During high-volatility periods – such as OPEC+ meetings for crude oil, US Federal Reserve meetings for precious metals, or EIA inventory releases – the exchange may revise SPAN parameters upward intraday. A position that was margined adequately at 9:00 AM may be in shortfall by 3:00 PM if the exchange issues a revised SPAN file.

Position in the expiry cycle

Margins for near-expiry contracts may be revised upward as the last trading day approaches. Exchanges often increase margin requirements during the delivery period to reduce the risk of delivery default.

Exchange-imposed additional margins

SEBI and the exchange can impose additional margins for specific contracts or market conditions. Examples include:

• Additional surveillance margin (ASM): Applied to contracts where the exchange detects unusual price movements or concentration of positions.
• Special margin: Applied in advance of major events (for example, OPEC+ meetings, US elections, or domestic policy announcements).

These are separate from the standard SPAN and Exposure margins and are typically communicated via MCX circulars.

Margin for intraday (MIS) positions

For MIS (Margin Intraday Square-off) positions, Zerodha applies a leverage multiplier that reduces the required margin compared to NRML. Typically, Zerodha offers 3x to 5x leverage on MIS positions in MCX commodities, meaning the margin required is one-third to one-fifth of the NRML margin.

However, MIS positions are automatically squared off by Zerodha before the close of the MCX trading session (typically between 11:00 PM and 11:20 PM IST for commodity contracts that trade until 11:30 PM). This auto-squareoff occurs at market price, which may be disadvantageous in a thin late-session market.

The SPAN calculator at zerodha.com defaults to NRML margin. Divide the Total margin figure by Zerodha’s current MIS leverage multiplier for the relevant commodity to estimate MIS margin. The MIS multiplier is shown in Kite’s order window and on Zerodha’s charges page.

CTT, brokerage, and other charges in margin planning

While margin and charges are distinct concepts, they both affect the funds available in the trading account. CTT at INR 10 per lakh of sell-side turnover is deducted from the account at the time of the sell-side transaction. On a trade where turnover is INR 10 lakh (for example, 100 barrels of crude oil at INR 10,000 per barrel = INR 10,00,000), the CTT is INR 10. Although small relative to the margin, CTT accumulates with high-frequency trading.

Brokerage (INR 20 or 0.03% per order, whichever is lower for Zerodha commodity trades), MCX transaction charges, SEBI fees, GST, and stamp duty are also deducted from the account. Ensure funds account for these charges in addition to the margin.

For a full charge breakdown see Zerodha commodities and securities transaction tax.

Cross-margining and collateral

Collateral margin from pledged holdings

Zerodha allows holders of equity or ETF holdings to pledge them as collateral to meet commodity futures margin requirements. The pledged holdings are subject to SEBI-specified haircuts (a deduction from market value to account for price risk of the pledged security). For example, if NIFTY ETF units worth INR 1,00,000 are pledged with a 10 percent haircut, the collateral margin credited is INR 90,000.

Importantly, SEBI regulations require that at least 50 percent of the total margin for futures positions be met by cash or cash equivalents (funds in the trading account). The remaining 50 percent may be met by collateral margin. This rule applies to commodity futures as well.

For the pledging procedure see how to pledge holdings for margin on Zerodha.

Cross-segment margin offset

Margin offset between MCX commodity positions and NSE equity F&O positions is not automatically granted by the exchange. The two segments have separate margin pools at Zerodha. Funds need to be in the commodity segment ledger to meet commodity futures margin.

Practical example: Gold Mini margin computation

Trade: Buy 5 lots of Gold Mini (10g each) at INR 76,500 per 10g, near-month expiry.

Contract value: 5 lots x 10g x INR 76,500 = INR 38,25,000

SPAN parameters (illustrative, June 2026 conditions):

• SPAN scanning range: 4% of contract value per lot
• SPAN margin per lot: 4% x INR 76,500 = INR 3,060 per lot
• SPAN for 5 lots: INR 15,300

Exposure margin: approximately 0.5% of contract value per lot

• Exposure per lot: 0.5% x INR 76,500 = INR 382.50
• Exposure for 5 lots: INR 1,912.50

Total margin for 5 lots: INR 15,300 + INR 1,912.50 = approximately INR 17,212.50

Recommended funds in account (with 20% buffer): INR 20,655

CTT on eventual sale: sell-side turnover = INR 38,25,000; CTT = INR 38.25

Brokerage: INR 20 per order (buy) + INR 20 per order (sell) = INR 40 total

These numbers are illustrative. Use the zerodha.com/margin-calculator/SPAN/ for current figures.

Common errors

• Using stale calculator output. The SPAN calculator pulls parameters from the latest MCX SPAN file, which is updated at least twice daily. A figure computed in the morning may be stale by mid-session. Recompute before placing orders.
• Ignoring exposure margin. Some traders look only at the SPAN figure and assume it is the total. Exposure margin adds 10–30 percent on top. Always use the Total margin row.
• Not accounting for MTM. If a position opens at a loss, the MTM debit the following morning reduces available margin. A trade that is margined correctly on day 1 may be in shortfall on day 2 after adverse MTM.
• Entering the wrong number of lots in the calculator. Double-check that the lot quantity in the calculator matches the intended order size.
• Assuming MIS margin equals NRML margin divided by 2. The actual MIS leverage multiplier varies by commodity and is published by Zerodha. Do not assume a fixed ratio.

Conflict-of-interest disclosure

The WebNotes Editorial Team has no financial relationship with Zerodha, MCX, or any commodity broker. No brokerage referral arrangement exists. All numerical examples are illustrative and based on publicly available exchange parameters; actual margins vary. Verify current rates and parameters on the relevant platform before trading.

Related guides

• How to calculate SPAN margin on Zerodha
• How to trade crude oil futures on MCX via Zerodha
• How to trade gold mini futures on Zerodha
• How to trade silver micro futures on Zerodha
• How to handle commodity physical delivery risk on Zerodha
• How to trade USDINR futures on Zerodha
• How to pledge holdings for margin on Zerodha
• Zerodha commodity segment
• Zerodha MCX membership
• Zerodha commodities
• MCX
• SEBI
• Commodity transaction tax
• Securities transaction tax
• Kite, Zerodha’s trading platform

References

1. SEBI Circular SEBI/HO/CDMRD/DMP/CIR/P/2021/020, Margining framework for commodity derivatives, Securities and Exchange Board of India.
2. MCX Circular on SPAN parameters and margin methodology (updated periodically), Multi Commodity Exchange of India Ltd, mcxindia.com.
3. SEBI Circular SEBI/HO/MIRSD/DOP/CIR/P/2020/28 dated 25 February 2020, Framework for margin collection from clients, Securities and Exchange Board of India.
4. Finance Act 2013, Section 116, Commodity Transaction Tax, Ministry of Finance, Government of India.
5. CME Group, SPAN Risk Manager Overview, cmegroup.com (SPAN methodology reference).
6. MCX Bye-Laws and Business Rules (current version), mcxindia.com.
7. Zerodha support article: “Margins at Zerodha”, support.zerodha.com.
8. SEBI Circular SEBI/HO/CDMRD/DMP/CIR/P/2018/96 dated 12 June 2018, Compulsory delivery in commodity derivatives, Securities and Exchange Board of India.