--- title: "F&O margin explained: SPAN, exposure margin, expiry day" description: "Premium upfront, SPAN, the exposure margin and its extra two percent on expiry day, worked on a dated Nifty lot, with what SEBI data say about capital." source_url: "https://www.rupeecase.com/learn/path-12/module-12-5-fo-margins-explained" --- [Path 12 5 of 9](/learn/path-12/)Margins without jargon: SPAN, exposure, expiry day margin and upfront premium[Next 12.6](/learn/path-12/module-12-6-cost-of-an-fo-trade) On Tuesday 16 Jun 2026 the weekly Nifty options expired and the index closed at 23,989.15. One lot of 65 units was worth Rs 15.59 lakh. Exposure margin on a sold index option is 2% of contract value, which at that level is Rs 31,186. On the day the option expires, the exchange adds another two percent, so the same sold option needs Rs 62,372. The option has not changed. The rulebook has. Margin is the exchange's estimate of one bad day, and I read it as the least capital a position can sit on, never as the right amount to hold. This lesson takes the stack apart layer by layer, so that when a broker screen says "insufficient funds" you know which layer it means. 3By the end you can 1. Name the margin layers on a bought and a sold Nifty option, and who pays which. 2. Say why the exposure margin on a sold index option doubles on its expiry day. 3. Tell margin apart from risk: what the exchange blocks, what one lot can lose, what SEBI data say about capital. ## The idea, plainly Think of margin as the deposit on a rented flat. The landlord keeps it against damage. It is not the rent, and it is not the most you can break. The exchange does the same with every open position: it holds money against the damage that position could do in one bad day, and asks for more when the bad day gets worse. ### The buyer: the premium, upfront A buyer pays the premium and owes nothing else. SEBI's circular of 1 Oct 2024 made brokers collect the net premium payable by the client upfront, from 1 Feb 2025, and counted it in the exchange's intraday margin checks. The premium is the whole bill and also the most the buyer can lose. [Module F13](/learn/path-14/module-14-3-option-buyer-vs-seller) sets both sides of one call next to each other. ### The seller: three layers * **SPAN.** The initial margin. NSE Clearing runs the position through a set of price and volatility scenarios and takes the worst loss, built so that a one day loss should beat the margin on only about one day in a hundred. For index products SEBI puts a floor under the price scenario: not less than 9.3% of the underlying price. * **Exposure margin.** NSE Clearing calls it extreme loss margin. For index derivatives it is two percent of the contract value, which for a short option means the index level at the last close times the units. It covers the tail beyond SPAN's scenarios. * **The expiry day add-on.** For a short index option on the day it expires, another two percent, whether the position was open at the start of the day or written during it. SEBI's reason was the heavy speculative trading in expiring options. On that day an expiring contract also gets no calendar spread offset. The exposure margin rate doubles on a sold option's last day The rate depends on the option, not the trader. The expiry day add-on is two percent on top of the usual rate. A future carries the usual two percent of its contract value. Source: NSE Clearing, Margins; SEBI circular of 1 Oct 2024. As of 16 Oct 2026. Futures are margined on both sides. NSE Clearing sets their margin over a two day horizon, since mark to market settlement cannot always be collected before the next session opens. ### It moves through the day Margin is checked, not just charged. Clearing corporations send brokers at least four random snapshots a day of each client's requirement, and the broker's collection is compared with the client's peak requirement across them as well as with the end of day figure. A position that fits at the open can need more at two o'clock. One SEBI circular took effect in three steps, two of them on margin 1. 20 Nov 2024**Another two percent on expiry day**Short options expiring that day carry an extra two percent of exposure margin. New index contracts must be worth at least Rs 15 lakh when introduced, and each exchange keeps one weekly index. 2. 1 Feb 2025**Premium upfront, no calendar offset on expiry day**Brokers collect the net option premium from buyers upfront, and an expiring contract gets no calendar spread offset. 3. 1 Apr 2025**Position limits watched through the day**At least four random snapshots a day, so a limit breach is seen when it happens, not at the close. Dates are the days each measure took effect. Lot sizes and expiry days are in the module on contract specifications. Source: SEBI circular SEBI/HO/MRD/TPD-1/P/CIR/2024/132 of 1 Oct 2024. As of 16 Oct 2026. For a sold call, the worst cell is a jump in the index | Move in the future | Rupees per lot | | --- | --- | | IV same | IV +4 | | +9.3% | −1.19L | −1.19L | | +4.65% | −51,113 | −54,153 | | 0% | −5 | −5,631 | | −4.65% | +18,828 | +16,170 | | −9.3% | +20,865 | +20,588 | Green is profit and red is loss; deeper colour means a larger amount. The outlined cell is the starting point. Black 76 on the 10 Jun 2026 chain, sold at the settlement price. The moves are percent of the future. This is a sketch of the idea, not NSE's number: the exchange sets its scan ranges in a daily risk file. Source: NSE end of day data, computed by RupeeCase. As of 10 Jun 2026. The term this section turns on: Exposure margin From the module glossary; every term is in the Learn glossary too. Source: Module 12.5, Margins without jargon: SPAN, exposure, expiry day margin and upfront premium. Read 2 more paragraphs, 91 words Here is the SPAN idea on one sold call from the 10 Jun 2026 chain. Each cell is the result on one lot right after a move in the future and a shift in volatility. SPAN takes the worst cell. The grid is my sketch. What it shows is the shape. For a sold call the damage sits in the top row, a jump in the index. Rising volatility makes every cell worse and matters most where the move is small. A fall of any size earns at most the premium. ## Worked example: one sold Nifty call, 10 Jun 2026 Nifty closed at 23,214.95 on Wednesday 10 Jun 2026 and the June future settled at 23,240.10. Take the 23,250 call, the strike nearest the future, at 321.65 a unit. A lot is 65 units. | Step | What we work out | Value | | --- | --- | --- | | 1 | Contract value: the Nifty close times 65 | Rs 15.09 lakh | | 2 | Premium of one lot: 321.65 times 65 | Rs 20,907 | | 3 | The buyer pays step 2 upfront, and that is the most the buyer can lose | Rs 20,907 | | 4 | The seller receives step 2 and must also post margin | Rs 20,907 | | 5 | Exposure margin, two percent of step 1 | Rs 30,179 | | 6 | A SPAN style sketch: the loss if the future ends 9.3% higher (intrinsic value less premium) | Rs 1.19 lakh | | 7 | Steps 5 and 6 together | Rs 1.49 lakh | | 8 | Step 7 as a share of step 1 | 10% | | 9 | Step 7 as a multiple of the premium received | 7.1 times | More margin used meant fewer losers, but even the highest band shown lost two times in three Capital employed is the highest peak margin a trader used in the year, cash and pledged securities together, in SEBI's sample of individual traders, which SEBI calls indicative. The top band above it had too few traders to show. Source: SEBI, Trading Behaviour of Individual Traders in the Equity Derivatives Segment (FY25 to FY26), Aug 2026, Table 6. As of 20 Aug 2026. Read 4 more paragraphs, 241 words The seller took in Rs 20,907, and on this sketch about Rs 1.49 lakh has to be set aside, roughly 7.1 times the premium and a tenth of the contract value. That ratio is the leverage. A jump to the edge of the scan range would use 80% of it in one day. Selling a far strike does not escape this. The 20,800 put, more than ten percent below the index, paid only Rs 507 a lot, yet its exposure margin is three percent of contract value, Rs 45,269. A far strike pays little premium and carries the higher rate, so each rupee of premium ties up far more margin than on a near strike. Does more capital help? SEBI's Aug 2026 behaviour study measured it, on a random sample of about five thousand individual traders. In FY26 the share who lost money fell as the peak margin they used rose, yet the average loss per trader rose too, from about Rs 5,600 in the lowest band to Rs 9.6 lakh in the band shown last. Capital changed the shape of the loss, not its sign. So how much capital does an option trade need? Three numbers answer three different questions. To buy: the premium. To sell: SPAN plus exposure margin, which your broker's screen shows and which moves. To stay in the game: a figure that depends on size, not on margin, and that [Module F29](/learn/path-12/module-12-7-position-sizing-and-risk-of-ruin) works out. ## The common mistake The belief: The margin on my screen is the most I can lose. Margin is a one day estimate, built to be beaten about once in a hundred days. It is a floor under the capital a position needs today, not a ceiling on what it can cost. Beyond the scan range a sold call has no cap, and every rupee of loss comes out of the account whatever the margin was. In the grid above, a jump to the edge of the scan range already costs Rs 1.19 lakh a lot against the Rs 20,907 collected. The question the screen cannot answer is the largest loss one lot can cause, and whether the account can pay it. ## Key takeaways * A buyer pays the premium upfront. That is the whole bill and the whole risk. * A seller posts SPAN plus exposure margin of two percent of contract value. * On its expiry day a sold index option carries another two percent. * SPAN estimates one bad day. It is a floor under capital, not a loss limit. * Far strikes pay little premium and carry a higher exposure margin rate. * In SEBI's FY26 sample more margin meant fewer losers, but most still lost. Watch in the terminal: what happens when funds or margin fall short? A short tutorial on sample data. **Before you trade.** Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. [Read the SEBI study](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) What does Margins without jargon: SPAN, exposure, expiry day margin and upfront premium cover?What the exchange holds against a position, layer by layer, and why the margin on a broker screen is the least capital a trade needs, not the most it can cost. It works through The idea, plainly, Worked example: one sold Nifty call, 10 Jun 2026, The common mistake, Key takeaways. It is module 12.5 of Path 12, Derivatives Basics and Rules, about 8 minutes of reading, free. TTry it ## Payoff builder, on the same example. Legs from a dated chain, the expiry and before expiry curves, breakevens and the charges. Dated NSE end of day data, nothing live, no orders. **Payoff builder**, Nifty, 10 Jun 2026, 30 Jun 2026 expiry. [Open the payoff builder](/learn/tools/payoff-builder?chain=NIFTY_2026-06-10_2026-06-30&preset=short-put) AF&O on RupeeCase ## Hedging only, in development F&O at RupeeCase will do one job: protect a portfolio you already own, by a rule published before it runs. No speculation, no naked option selling, no leveraged bets. It is not available yet. [How hedging will work](/hedging)[Sign up for RupeeCase](https://invest.rupeecase.com/signup) [No hedgeFalls with the marketWith a putA floor, for a premiumIllustration with made up numbers, not a product and not a recommendation.](/hedging) QQuick check ## 10 questions, 7 to pass. Each attempt draws 10 of the 15 questions in this module's bank, and a retake draws a fresh set. A pass gives this module's Certificate of Completion. Your result stays on this device and counts towards the Path 12 certificate. 7 of 10 correct passes module 12.5 Every answer is explained when you check; a retake is always free. Source: RupeeCase Learn quiz rules (70% to pass). Passed ### Certificate ID Download PNGPrint or save as PDF[Check the ID](/learn/certificates/verify) Self paced and unproctored. A record of completing free education by RupeeCase; not a NISM certificate and not endorsed by NISM, NSE, BSE or SEBI. It qualifies no one to deal, advise or publish research. CCheck yourself ## Path 12 so far. Your quick check results on this device, stop by stop. Stop 5 of 9 on Path 12 Derivatives Basics and Rules: every live stop, this module ringed. Source: RupeeCase Learn, Path 12. 1. [12.1Why derivatives exist: forwards, futures and options in one storyNot yet](/learn/path-12/module-12-1-why-derivatives-exist) 2. [12.2India's F&O market map: exchanges, clearing, SEBI and who tradesNot yet](/learn/path-12/module-12-2-india-fo-market-map) 3. [12.3Read SEBI's loss studies before your first tradeNot yet](/learn/path-12/module-12-3-sebi-fo-loss-studies) 4. [12.4Contract specs that matter now: lots, expiry days, strikes and settlementNot yet](/learn/path-12/module-12-4-contract-specs-lots-and-expiries) 5. [12.5Margins without jargon: SPAN, exposure, expiry day margin and upfront premiumNot yet](/learn/path-12/module-12-5-fo-margins-explained#quiz) 6. [12.6The real cost of a trade: STT, exchange fees, SEBI fee, GST and stamp dutyNot yet](/learn/path-12/module-12-6-cost-of-an-fo-trade) 7. [12.7Position sizing and risk of ruin for F&O beginnersNot yet](/learn/path-12/module-12-7-position-sizing-and-risk-of-ruin) 8. [12.8Red flags in F&O: tip groups, too good claims and registration checksNot yet](/learn/path-12/module-12-8-fo-red-flags) 9. [12.9Behaviour in F&O: loss chasing and what SEBI's behaviour study foundNot yet](/learn/path-12/module-12-9-fo-trading-behaviour) 10. [TPath test, 30 questionsNot yet](/learn/path-12/module-12-9-fo-trading-behaviour#pathTestSection) Path 12 in reading time: 72 minutes over 9 modules Minutes of reading per module, this one in amber. Source: RupeeCase Learn, Path 12. Explore next ## Put the module to work. * [Free module 17.12Expiry day: gamma, theta, settlement and the rules10 min read](/learn/path-17/module-17-12-expiry-day) * [Free module 12.4Contract specs that matter now: lots, expiry days, strikes and settlement9 min read](/learn/path-12/module-12-4-contract-specs-lots-and-expiries) * [Free module 14.3Buyer or seller: payoffs, margin, win rate and expectancy9 min read](/learn/path-14/module-14-3-option-buyer-vs-seller) * [Free module 12.7Position sizing and risk of ruin for F&O beginners8 min read](/learn/path-12/module-12-7-position-sizing-and-risk-of-ruin) * [QuestionHow much capital do I need to trade or sell options?A short answer with a dated chart](/learn/questions/capital-needed-for-options) * [QuestionWhat are SEBI's F&O rules on lot size, weekly expiry and upfront premium?A short answer with a dated chart](/learn/questions/sebi-fo-rules) Community ## Join my WhatsApp group. Scan the code, fillFill one short form, and join my WhatsApp group. Slides, sources, factsheets and the rebalance logs live there, and members join a daily Google Meet with me. New to RupeeCase? [Getting started](/getting-started) [See the terminal](/terminal) [Sign up for RupeeCase](https://invest.rupeecase.com/signup) [Join the WhatsApp group](https://forms.gle/C6HMtM1Z2GfeocQV7) [One form, one group](https://forms.gle/C6HMtM1Z2GfeocQV7)Scan with your phone camera SSources ## Go to the source. 5 sources, SEBI the most cited The publisher of each source listed below. Source: Module 12.5 source list. 1. [NSE Clearing, Margins: SPAN, initial margin and extreme loss margin](https://www.nseclearing.in/risk-management/equity-derivatives/margins) NSE 2. [SEBI circular of 1 October 2024, Measures to strengthen the equity index derivatives framework](https://www.sebi.gov.in/legal/circulars/oct-2024/measures-to-strengthen-equity-index-derivatives-framework-for-increased-investor-protection-and-market-stability_87208.html) SEBI 3. [SEBI, Master circular for stock exchanges and clearing corporations, chapter 5 on exchange traded derivatives (initial margin, extreme loss margin, upfront collection)](https://www.sebi.gov.in/sebi_data/commondocs/dec-2024/RE_Chapter%205%20-%20Exchange%20Traded%20Derivatives%20FINAL_1_p.pdf) SEBI 4. [SEBI, Trading Behaviour of Individual Traders in the Equity Derivatives Segment (FY25 to FY26), August 2026](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-trading-behaviour-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103836.html) SEBI 5. Hull, J., Options, Futures, and Other Derivatives, Pearson (margin accounts and clearing houses) Book GTerms ## 5 terms from this module. SPAN marginA portfolio model the clearing corporation uses to set initial margin from the worst loss across price and volatility scenarios, built so a one day loss should beat it on only about one day in a hundred. Exposure marginThe extra margin on top of SPAN that NSE Clearing calls extreme loss margin. For index derivatives it is two percent of the contract value. Contract valueThe value of the underlying one contract covers: the index level times the units in a lot. Peak marginThe highest margin requirement of a client across the day's snapshots. The broker's collection is checked against it. Upfront premiumThe net option premium a client owes, which brokers have had to collect before the trade since 1 Feb 2025. [All 230 terms in the glossary](/learn/glossary) [Question people askHow much capital do I need to trade or sell options?A short answer with a dated chart](/learn/questions/capital-needed-for-options)[Question people askWhat are SEBI's F&O rules on lot size, weekly expiry and upfront premium?A short answer with a dated chart](/learn/questions/sebi-fo-rules)[Related module12.4 Contract specs that matter now: lots, expiry days, strikes and settlement9 min, Beginner](/learn/path-12/module-12-4-contract-specs-lots-and-expiries)[Related module14.3 Buyer or seller: payoffs, margin, win rate and expectancy9 min, Beginner](/learn/path-14/module-14-3-option-buyer-vs-seller)[Pillar guideDerivatives and Quant115 modules across paths 12 to 19](/learn/derivatives) Education only, not investment advice, a research report or a recommendation to buy, sell or hold any security. RupeeCase (QC Alpha Technologies Pvt Ltd) is not registered with SEBI as an investment adviser or research analyst. Contracts and prices shown are for illustration only, come from NSE end of day files at least 30 days old, and are not recommendatory. Derivatives trading carries a high risk of loss.