Future Margin Calculator

| Added in Business Finance

What is Future Margin and Why Should You Care?

Future Margin is the total capital required to maintain a futures trading position. It consists of SPAN margin (for potential losses) plus exposure margin (for additional risk coverage).

Understanding margin requirements is essential for futures traders to properly manage capital and avoid margin calls.

How to Calculate Future Margin

The formula for future margin is:

[\text{Future Margin} = \text{SPAN Margin} + \text{Exposure Margin}]

Where:

  • SPAN Margin is the Standard Portfolio Analysis of Risk margin
  • Exposure Margin is additional margin based on position exposure

Calculation Examples

Example 1:

  • SPAN Margin: $150
  • Exposure Margin: $60

$$\text{Future Margin} = 150 + 60 = 210$$

Example 2:

  • SPAN Margin: $200
  • Exposure Margin: $90

$$\text{Future Margin} = 200 + 90 = 290$$

Margin Components Summary

Component Purpose Typical Range
SPAN Margin Core risk coverage Varies by position
Exposure Margin Additional volatility buffer 15-40% of SPAN
Total Full requirement Sum of both

Frequently Asked Questions

SPAN (Standard Portfolio Analysis of Risk) margin is a risk-based margining system that calculates the worst-case loss a portfolio could suffer, determining the minimum margin required.

Exposure margin is an additional margin charged over SPAN margin to cover the risk of adverse price movements beyond normal market conditions.

Margin acts as a performance bond ensuring traders can meet their obligations. It protects both the exchange and other market participants from counterparty default risk.

Yes, margin requirements can change based on market volatility, position size, and regulatory requirements. Higher volatility typically leads to increased margin requirements.