Definition
Exposure Margin
Exposure margin is an additional buffer collected on top of SPAN margin to cover extreme or unexpected market moves.
On top of the scenario-based SPAN margin, the exchange charges an exposure margin — an extra percentage of the contract value — as a second cushion against tail risk. Together, SPAN plus exposure equals the total upfront margin a trader must have to take an F&O position.
On the NSE, exposure margin is typically a small percentage of the notional value and is higher for options writing and volatile stocks. SEBI's upfront and peak margin rules mean Indian brokers must collect both components before the trade, ending the old practice of intraday leverage on shortfalls.
Related terms
- Notional ValueNotional value is the full market value an F&O contract controls — the lot size times the underlying price.
- SPAN MarginSPAN margin is the core risk-based margin for F&O positions, calculated by simulating worst-case price and volatility moves.
- Peak MarginPeak margin is SEBI's rule requiring brokers to ensure full margin is available at the highest exposure point during the day, checked via random snapshots.
- MarginMargin is the upfront money a trader must keep with the broker as collateral to take a leveraged futures or options position, set by the exchange to cover potential losses.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.