SPAN is short for Standard Portfolio Analysis of Risk. It is a risk management system used by CME Globex to assess the margin requirements for trading options and futures contracts. The SPAN margin system was developed by the Chicago Mercantile Exchange (CME) in 1988.
The SPAN margin system uses a portfolio approach to determine margin requirements, rather than the traditional method of using the highest potential loss from a single contract as the basis for the margin. The SPAN system calculates margin requirements by taking into account the overall risk of a portfolio of contracts, rather than the risk of any one individual contract.
The SPAN system assigns a risk factor to each type of contract in a portfolio. These risk factors are used to calculate the margin requirements for the portfolio as a whole. The SPAN system is designed to provide a margin that will cover the maximum potential loss from any one contract in the portfolio.
The SPAN system is constantly updated to reflect the changing risk of the underlying contracts. The SPAN margin requirements are reviewed and updated on a daily basis.
The SPAN system is used by CME Globex to assess the margin requirements for trading options and futures contracts. The SPAN system is constantly updated to reflect the changing risk of the underlying contracts. The SPAN margin requirements are reviewed and updated on a daily basis.
How is SPAN margin calculated by NSE?
SPAN Margin is the margin required to trade in India's derivative markets. It is calculated using a complex mathematical formula that takes into account the price of the underlying asset, the strike price of the option, the time to expiration, the volatility of the underlying asset, and the interest rate.
How does span margin work?
When you buy or sell options, your broker will require you to post what's called a margin. Margin is simply a good faith deposit that shows you're serious about the trade and it allows you to hold your position open.
The amount of margin required depends on the option you're trading. For example, margin requirements for buying options are generally lower than for selling options.
Once you've posted your margin, your broker will give you a Max Pain Value. This is the price at which the most options expire worthless.
As long as the price of the underlying security remains above the Max Pain Value, your position will remain open. However, if the price of the underlying security falls below the Max Pain Value, your broker may close your position to protect you from further losses.
What is the difference between Span margin and exposure margin? Span margin and exposure margin both represent the amount of margin required to trade a particular contract. However, span margin is calculated using the SPAN methodology, while exposure margin is calculated using the Exposure methodology.
The main difference between the two is that exposure margin takes into account the potential future exposure of the position, while span margin only looks at the maximum potential loss of the position. This means that exposure margin will usually be higher than span margin.
What is M to M in share market?
M to M in share market refers to a strategy where an investor buys a share at the current market price and sells it at a higher price, with the intention of buying it back at a lower price and repeating the process. This strategy can be used to generate income or to speculate on the direction of the market.
What is the very basic objective of SPAN margin?
The very basic objective of SPAN margin is to ensure that an options trader has enough capital to cover the maximum possible loss that could occur on their position. SPAN margin is calculated using a complex formula that takes into account the underlying asset's price, the strike price of the options, the expiration date of the options, and the volatility of the underlying asset.