ELM on WebNotes

ELM (Extreme Loss Margin) on Zerodha

Wed, 20 May 2026 00:00:00 +0000

Extreme Loss Margin (ELM) is a tail-risk buffer added on top of SPAN margin for F&O positions on Indian exchanges. It exists to cover the loss scenarios that exceed SPAN’s standard 16 scenarios; effectively the worst-of-the-worst buffer.

What ELM covers

SPAN computes worst-case loss within a defined scenario range. ELM covers:

Beyond-SPAN tail scenarios (very large adverse moves).
Worst-case volatility spikes not captured by SPAN’s volatility scenarios.
Liquidity-driven mark-to-market gaps.

Rate

Contract type	ELM rate (approximate)
Index F&O	1-3% of notional
Stock F&O	3-5% of notional
Currency derivatives	0.5-1% of notional
Commodity (MCX)	1-4% (varies)

These are set by the exchange and revised periodically.

Exchange margin types (SPAN, ELM, Adhoc, VAR)

Wed, 20 May 2026 00:00:00 +0000

Indian exchanges (NSE, BSE, MCX) use several margin types in combination to manage participant risk. The four main types are SPAN (Standard Portfolio Analysis of Risk), ELM (Extreme Loss Margin), Adhoc margin, and VAR (Value at Risk). Each addresses a different aspect of margin calculation.

SPAN

SPAN is the portfolio-level worst-case loss calculation used primarily for F&O margins. The exchange’s SPAN engine:

Runs 16 stress scenarios (price up, price down, volatility up, volatility down, combinations).
Computes worst-case portfolio loss across scenarios.
This worst case becomes the SPAN margin.

SPAN is portfolio-aware: hedged positions get reduced SPAN; isolated short positions get full SPAN.

VAR + ELM intraday margin on Zerodha

Wed, 20 May 2026 00:00:00 +0000

VAR + ELM is the margin framework applied to equity intraday (cash segment) trades on Zerodha (and any Indian broker). For F&O, SPAN + Exposure is the framework; for equity cash, it’s VAR + ELM.

VAR (Value at Risk)

VAR is the volatility-based margin component per scrip:

Scrip-specific historical volatility.
99% confidence interval.
1-day horizon.
VAR margin = price level x VAR factor.

For a Rs 100 large-cap scrip with 1.5% daily volatility, VAR might be ~9% of notional.

Extreme Loss Margin (ELM)

Sun, 17 May 2026 00:00:00 +0000

Extreme Loss Margin (ELM) is an additional initial-margin layer levied by Indian clearing corporations and exchanges on top of the scenario-based margin components (SPAN margin for derivatives, value-at-risk margin for cash equities) and exposure margin . ELM is calibrated by SEBI to cover statistically extreme adverse price moves that the scenario-based methodologies, however well-calibrated, can miss. Where SPAN’s price-scan range targets approximately 99 per cent confidence in covering daily price moves, ELM extends the margin requirement to cover the residual 1 per cent tail of more extreme moves.

How to calculate margin using the Zerodha SPAN calculator

Tue, 12 May 2026 00:00:00 +0000

The Zerodha SPAN margin calculator at zerodha.com/margin-calculator is the standard tool for estimating the funds required before initiating a futures or options position on the NSE or BSE . This guide explains how the calculator works, how to read its output, and what the regulatory margin components mean.

For background on how margin works in the F&O segment see F&O segment on Zerodha and Margin pledge mechanics .

What SPAN and ELM mean

SPAN (Standard Portfolio Analysis of Risk) is a margin methodology developed by the Chicago Mercantile Exchange and adopted by Indian exchanges. SPAN calculates the worst-case one-day loss on a portfolio under 16 market scenarios that combine price and volatility moves. The exchange updates SPAN parameter files (called risk parameter files or RPFs) intraday, typically at 11 AM and after market close.