SPAN and exposure margin on Kite
For every F&O trade on Kite , the broker collects an initial margin that has two components: SPAN (Standard Portfolio Analysis of Risk) and Exposure. Together they cover the worst-case loss the position could experience under stress, plus a buffer.
What SPAN is
SPAN is the worst-case loss calculation performed by NSE Clearing using a scenario-based model. The clearing engine runs 16 standard scenarios for each contract (price up, price down, volatility up, etc.) and identifies the maximum loss across these scenarios. That maximum loss is the SPAN margin.
SPAN is portfolio-aware. It looks at all your positions simultaneously and computes the net SPAN for the combination. A long-call + short-call spread has less risk than the components separately; SPAN reflects this.
The SPAN file is published by NSE Clearing several times during the trading day. New SPAN values can change the displayed margin required on the order ticket.
What Exposure is
Exposure margin is an additional fixed-percentage buffer on top of SPAN. The exchange sets it for each contract type:
| Contract | Exposure margin (approximate) |
|---|---|
| Index futures | 3% of notional value |
| Stock futures | 5% of notional value |
| Index options | 3-5% of notional value (varies) |
| Stock options | 5-7% of notional value (varies) |
| Currency futures | 1-2% |
| Commodity futures (varies by commodity) | 4-7% |
Exposure is not portfolio-aware; it is a per-contract figure.
Initial margin = SPAN + Exposure
The displayed initial margin is the sum:
Initial margin = SPAN + Exposure.
For a single index option short, this typically works out to ~10-15% of the notional contract value. For a multi-leg strategy, the SPAN reduction from offsetting positions can bring the total below 10%.
Intraday updates
The SPAN engine refreshes during the day. If volatility spikes, the worst-case scenarios scale up; the SPAN requirement increases.
For an open position, this means the margin used on Kite can rise intraday even without a new trade. If it rises past your margin available, you face a margin shortfall .
Maintenance margin
The initial margin is what’s collected at open. Once the position is open, the position continues to need SPAN + Exposure margin every day (mark-to-market against today’s settlement). This is sometimes called the maintenance margin.
If your account margin drops below the required maintenance margin (due to MTM losses), you must:
- Add funds (cash).
- Or close the position to free up margin.
- Or risk auto-square-off.
Portfolio margin benefits
Multi-leg strategies see real margin benefits:
| Strategy | Initial margin vs. single legs |
|---|---|
| Bull call spread (long lower, short higher) | Net debit + small margin |
| Iron condor (4 legs) | Significantly less than the sum of individual legs |
| Calendar spread (long near, short far) | Reduced |
| Strangle (short OTM call + short OTM put) | More than each separately; SPAN sees both tails |
The Zerodha Span calculator computes the actual SPAN + Exposure for any combination.
Hedge benefit
A short option position with an offsetting long option (hedge) sees a substantial margin reduction. SEBI’s framework specifically incentivises hedged short options (lower SPAN). For an unhedged short option, the SPAN is calculated on the worst-case unlimited-loss scenario; for a hedged short, the max loss is capped at the spread width.
What happens at expiry
On the expiry day:
- Index options cash-settle to the underlying value.
- Stock options physically settle (with attendant pre-expiry margin increases).
In the days leading to expiry, the SPAN for stock options can increase substantially (physical-delivery margin layer). Many short option positions get unwound 2-3 days before expiry for this reason.
See also
- Margin available / used / cash on Kite funds
- Margin required on order window
- Margin on exit calculation
- Delivery margin field on Kite
- Pay-in funds explained
- Option premium credit on Kite funds
- Collateral (equity) on Kite
- Collateral (liquid funds) on Kite
- Dashboard / funds calculation flow
- Margin shortfall and auto-square-off
- Margin pledge (Zerodha)
- Margin haircut
- P symbol on holdings page
- Kite Positions tab explained
- Kite Holdings tab explained
- F&O LTP change on positions before market opens
- Sold stocks shown as negative positions
- Futures and options
- How to add F&O contracts to the marketwatch
- How to add Nifty / BankNifty options to the marketwatch
- How to add MCX F&O to the marketwatch
- Derivative lot size on NSE
- NSE derivatives expiry calendar
- Settlement (F&O)
- Auto square-off on Zerodha
- Kite (Zerodha)
- Kite web
- Kite mobile app
- Zerodha
External references
- NSE Clearing, SPAN margin methodology
- Zerodha margin calculator
- SEBI, F&O margin framework
- NSE F&O segment
References
- NSE Clearing, SPAN methodology and parameter file, nseclearing.com.
- SEBI, F&O margin framework, circulars on initial and exposure margin.
- Zerodha Support, SPAN and exposure margin, support.zerodha.com.
- Zerodha margin policies, F&O margin calculation, zerodha.com.