SPAN on WebNotes

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.

Hedged positions margin benefit on Zerodha

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

Hedged F&O positions on Zerodha enjoy reduced SPAN margin compared to naked positions. The SPAN engine recognises offsetting legs (long + short, long-call + long-put strangle, etc.) and reduces the worst-case loss scenario, resulting in lower margin requirements.

How hedge benefit works

The SPAN engine runs 16 stress scenarios across the portfolio. For each scenario:

Naked short call: large loss in up-scenarios.
Long call (hedge): gain in up-scenarios offsetting the short.
Net loss across scenarios is much smaller.

The SPAN margin reflects the smaller worst-case loss, giving the hedge benefit.

SPAN and exposure margin on Kite

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

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 margin on Zerodha

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

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.

Zerodha margin calculator

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

The Zerodha margin calculator at zerodha.com/margin-calculator is a free public tool that computes the SPAN + Exposure margin required for any F&O contract or multi-leg strategy. It is widely used by Indian retail F&O traders for pre-trade planning.

What it shows

For a given contract or combination of contracts:

Output	Detail
SPAN margin	Worst-case loss across exchange stress scenarios
Exposure margin	Fixed-percentage buffer
Total initial margin	SPAN + Exposure (the upfront requirement)
Premium impact	For options, the premium paid / received
Hedge benefit	When multi-leg strategies are entered
Final margin	Net margin after hedge benefit

The calculator updates with the latest SPAN file from NSE Clearing.