SPAN margin on Zerodha
SPAN margin (Standard Portfolio Analysis of Risk) is the primary initial-margin component for F&O positions on Indian exchanges. It is computed by NSE Clearing (and BSE clearing) using a 16-scenario stress test that finds the worst-case portfolio loss. Zerodha mirrors the exchange’s SPAN; it cannot offer below-SPAN margin.
How SPAN works
NSE Clearing’s SPAN engine, for each portfolio:
- Defines 16 standard scenarios combining price moves (up/down by various %) and volatility changes (up/down).
- Computes the position’s loss under each scenario.
- Identifies the maximum loss across scenarios.
- This worst-case loss is the SPAN margin requirement.
The scenarios are pre-defined by the SPAN methodology; volumes and parameters update via the daily SPAN file.
Why portfolio-aware
SPAN is portfolio-aware: it looks at all positions simultaneously, accounting for hedges.
Example for a hedged position:
- Long 1 NIFTY 22000 PE (long put).
- Short 1 NIFTY 21800 PE (short put with lower strike).
Standalone SPAN for the short put alone might be Rs 1.3 lakh. SPAN for the spread (both legs) might be only Rs 25K. The hedge reduces SPAN substantially.
This portfolio-level computation is the SPAN engine’s key value.
Daily updates
SPAN file is published by NSE Clearing:
- End of day (most days).
- Mid-day for some volatile scenarios.
- The exchange may update the file multiple times during heightened volatility.
Brokers (including Zerodha) consume the SPAN file and update margin requirements in real time on the Kite order ticket and Margin calculator .
SPAN vs Exposure
SPAN is the dynamic, portfolio-aware component. Exposure margin is the additional fixed-percentage buffer added on top.
| Component | Nature | Variability |
|---|---|---|
| SPAN | Worst-case loss across 16 scenarios | Daily updates; varies by volatility |
| Exposure | Fixed % of notional per exchange | Set by exchange; not portfolio-aware |
Initial margin = SPAN + Exposure.
What SPAN includes
| Coverage | Detail |
|---|---|
| Price risk | Up / down scenarios |
| Volatility risk | Up / down scenarios |
| Time decay | For multi-day scenarios |
| Cross-contract correlation | Within a portfolio |
| Limited diversification | Caps on hedge benefit |
What SPAN doesn’t include:
- Settlement risk (separate).
- Counter-party risk (handled by CCP).
- Liquidity risk (not in SPAN scenarios).
Intraday changes
The SPAN file refreshes during the day. Possible refresh times:
- 09:00 (start of day SPAN).
- 10:30 to 11:30 (first mid-session update).
- 13:00 to 14:00 (afternoon update).
- 15:30 (end-of-day).
If a refresh happens with elevated volatility, the SPAN margin requirement increases. This can cause margin shortfall for tight positions.
SEBI’s role
SEBI sets the framework:
- Mandates SPAN-based methodology.
- Sets hedge benefit caps.
- Approves the SPAN engine and its updates.
NSE Clearing operates the SPAN engine; Zerodha and other brokers consume it.
SPAN on the calculator
The Zerodha margin calculator shows the SPAN component explicitly:
- Input: contract, quantity, side.
- Output: SPAN + Exposure breakdown.
For multi-leg strategies, the calculator shows both standalone and combined SPAN, demonstrating the hedge benefit.
Stock F&O specifics
Stock F&O has additional layers:
- Standard SPAN applies during the contract’s life.
- Pre-expiry physical-delivery margin kicks in days before expiry. See Delivery margin field on Kite .
- Expiry-day settlement uses the underlying’s closing price.
For index F&O, no physical-delivery margin (cash-settled).
Effect on retail traders
For active F&O retail traders:
- SPAN drives most of the margin requirement.
- Hedged strategies are SPAN-efficient (smaller margin).
- Naked short options are SPAN-heavy (large margin).
Strategy choice is partly driven by SPAN economics.
See also
- Exchange margin types (SPAN, ELM, Adhoc, VAR)
- Exposure margin on Zerodha
- 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
- Intraday leverages for MIS / CO
- Intraday margin increases on volatile days
- Cash component vs collateral component
- Margin shortfall and auto-square-off
- 50:50 cash collateral rule explained
- SEBI peak margin rules explained
- Upfront margin requirements post-2020
- SEBI margin pledge rules September 2020
- Direct payout to demat SEBI rule
- Margin pledge (Zerodha)
- Margin haircut
- Margin on exit calculation
- Delivery margin field on Kite
- Settlement (F&O)
- Lot size revision F&O 2024
- Futures and options
- Kite Positions tab explained
- Zerodha
- Kite (Zerodha)
External references
References
- NSE Clearing, SPAN methodology and parameter file, nseclearing.com.
- SEBI, SPAN framework for F&O margin, sebi.gov.in.
- Zerodha Support, SPAN margin computation, support.zerodha.com.