Knowledge Base

To trade F&O, you don’t pay the full value of the contract you pay a margin. This margin acts as a security deposit that the exchange holds to cover potential losses on your position. Here’s how it works.

What is margin?

Margin is the minimum amount you need in your account to enter an F&O position. It is calculated as a percentage of the total contract value and is blocked in your account for as long as you hold the position.

The total margin required for an F&O position has two components – SPAN margin and exposure margin.

SPAN margin

SPAN stands for Standard Portfolio Analysis of Risk. It is the minimum margin required by the exchange and is calculated based on the worst possible loss your position could suffer in a single day under different market scenarios.

SPAN margin is dynamic it changes based on market volatility. When markets are volatile, SPAN margin requirements go up. When markets are calm, they come down.

Exposure margin

Exposure margin is an additional buffer collected over and above SPAN margin. It covers any losses that may occur beyond the SPAN margin estimate for example, if the market gaps up or down sharply overnight.

Exposure margin is typically a fixed percentage of the contract value, set by the exchange.

Total margin = SPAN margin + Exposure margin

For example, if a Nifty futures contract requires a SPAN margin of ₹80,000 and an exposure margin of ₹20,000, you need a total of ₹1,00,000 in your account to enter the position.

What happens if your margin falls short?

If your account balance falls below the required margin due to losses on your position, Samco will notify you via SMS and email. You will need to add funds to bring your account back to the required level. If you don’t, your position may be squared off to limit further losses.