The price move a margin model assumes when stressing a portfolio — effectively the size of the one-day loss the exchange wants covered.
Under SPAN the scanning range is the maximum price change tested in the scenario grid, calibrated so that it covers something like 99% of daily moves over a lookback window. Margin on an outright position is essentially the scanning range times the contract-multiplier.
Because it is calibrated on recent volatility, the scan range moves with the market. It widens after a violent week, which is why margins rise after the damage rather than before it, forcing deleveraging into an already stressed market.
Example: crude scanning range of $4.50 a barrel on a 1,000-barrel contract gives roughly $4,500 of margin. If realised volatility doubles and the range goes to $8.00, margin jumps to about $8,000 per contract and every leveraged holder must find cash or cut.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.
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