To trade F&O you post margin — collateral the exchange holds against your position. In India it has two main parts: SPAN and exposure.
SPAN margin
SPAN (Standard Portfolio Analysis of Risk) is a scenario-based margin: the exchange simulates price and volatility moves and charges enough to cover the worst likely one-day loss on your portfolio.
Exposure margin
Exposure is an additional buffer on top of SPAN, sized as a percentage of contract value. Together, SPAN + exposure = the total margin blocked to open the position.
Why spreads need far less
SPAN nets offsetting risk. A naked futures or short option can lose a lot in a bad scenario, so it attracts high margin. A defined-risk spread (long + short) can only lose the width between strikes — SPAN sees the hedge and charges a fraction of the naked requirement. That margin efficiency is a core reason to trade spreads.
| Position | Typical margin |
|---|---|
| 1 lot index future / naked short option | High (₹1L+ range) |
| Defined-risk debit/credit spread | Low — roughly the debit or the spread width |