# Volatility for calculating SPAN and exposure margin
**URL:** https://tradingqna.com/t/volatility-for-calculating-span-and-exposure-margin/73958
**Category:** F&O
**Created:** [April 4, 2020, 7:42am UTC](https://tradingqna.com/t/volatility-for-calculating-span-and-exposure-margin/73958 "2020-04-04T07:42:05Z")
**Posts on this page:** 5
**Page:** 1
### Author:  [@MCXQuest](https://tradingqna.com/u/MCXQuest)
#### Post date: [April 4, 2020, 7:42am UTC](https://tradingqna.com/t/volatility-for-calculating-span-and-exposure-margin/73958/1 "2020-04-04T07:42:05Z")
Referring to below answer
> [@There is a change in F&O Margin Policy again? Can somebody explain how this will affect us?](https://tradingqna.com/t/there-is-a-change-in-f-o-margin-policy-again-can-somebody-explain-how-this-will-affect-us/52179/3):
>
> SPAN margins are charged to cover for the worst possible movement in the contract you are trading for a single day. The exchange has now revised this to cover for possible volatility over 2 days. SPAN margins are charged by calculating the Price Scan Range of the index or the stock. Price Scan Range(PSR) is the worst possible movement in a scrip in a day. PSR is calculated using the daily volatility of the scrip. It is 3 sigma of the daily volatility for index contracts and 3.5 sigma for stocks…
For futures of equities SPAN is defined as the 1.414 x max(3.5 x daily volatility,7.5%).
For MARUTI:
Daily volatility is 0.05817 so the SPAN is 0.05817 x 100 x 4006.15 x 3.5 x 1.414 = 115335. But according the margin calculator of Zerodha it is 118361.
Underlying T Day Close Price (A) Underlying T-1 Day Close Price (B) Underlying T-2 Day Close Price (C)
4006.15 4253.75 4285.9
Underlying Log Returns (D) = LN(A/B) Underlying Log Returns (E) = LN(B/C)
-0.059970266 -0.007529618
Current Day Underlying Daily Volatility (E) = Sqrt(0.94 x D x D + 0.06 x C x C)
0.058172576
Calculating volatility based on the way NSE calculates daily volatility.
Is Zerodha using other way of calculating volatility if so what is it?
Margin benefit in SPAN margin: How to calculate the benefit in SPAN margin?
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### Author:  [@siva-reddy](https://tradingqna.com/u/siva-reddy)
#### Post date: [April 4, 2020, 8:04am UTC](https://tradingqna.com/t/volatility-for-calculating-span-and-exposure-margin/73958/2 "2020-04-04T08:04:31Z")
> [@MCXQuest](#):
>
> Is Zerodha using other way of calculating volatility if so what is it?
We don’t do any internal calculations, we just pass what is asked by exchange.
> [@MCXQuest](#):
>
> Margin benefit in SPAN margin: How to calculate the benefit in SPAN margin?
You can refer [this](https://www1.nseindia.com/products/content/derivatives/equities/nsccl_span.htm) as a starting point and there are couple of NSE papers on span mechanics in detail if you want to dig deep.
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### Author:  [@MohammedFaisal](https://tradingqna.com/u/MohammedFaisal)
#### Post date: [April 7, 2020, 5:02am UTC](https://tradingqna.com/t/volatility-for-calculating-span-and-exposure-margin/73958/3 "2020-04-07T05:02:18Z")
> [@MCXQuest](#):
>
> Daily volatility is 0.05817 so the SPAN is 0.05817 x 100 x 4006.15 x 3.5 x 1.414 = 115335. But according the margin calculator of Zerodha it is 118361.
The difference would arise due to the change in SPAN files during the day. The volatility and price of the contract would have changed causing the difference with the margin calculator. What is charged on our trading terminal is what is blocked by the exchange.
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### Author:  [@MCXQuest](https://tradingqna.com/u/MCXQuest)
#### Post date: [April 8, 2020, 6:31am UTC](https://tradingqna.com/t/volatility-for-calculating-span-and-exposure-margin/73958/4 "2020-04-08T06:31:57Z")
Thanks for the link @siva-reddy.
So Zerodha uses the span file to calculate the SPAN margin.
For the exposure margin it is 7.07% or 1.5 sigma, whichever is higher of the exposure.
From where do you get the sigma for the stocks? Can you share that?
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### Author:  [@siva-reddy](https://tradingqna.com/u/siva-reddy)
#### Post date: [April 8, 2020, 7:35am UTC](https://tradingqna.com/t/volatility-for-calculating-span-and-exposure-margin/73958/5 "2020-04-08T07:35:44Z")
> [@MCXQuest](#):
>
> For the exposure margin it is 7.07% or 1.5 sigma, whichever is higher of the exposure.
Exposure is fixed for now. Exchanges publishes it once a month, I think.
> [@MCXQuest](#):
>
> From where do you get the sigma for the stocks?
Exchange publishes it. Can check reports published by exchange below.
[https://www1.nseindia.com/products/content/all\_daily\_reports.htm](https://www1.nseindia.com/products/content/all_daily_reports.htm)
Also all the info is available on NSE website, try digging that website.