The CME's portfolio margining system, which sets requirements by simulating a portfolio's worst plausible one-day loss across price and volatility scenarios.
Rather than charging a flat amount per contract, SPAN runs a grid of scenarios — price up and down by a defined range, volatility up and down — and takes the largest loss. Offsetting positions therefore get credit automatically.
That is why a intramarket-spread costs a fraction of two outrights, and why an options position that looks huge in contract count can carry modest margin. It is also why margin can jump overnight when the exchange widens its scan range after a volatile session.
Example: one long and one short crude month might each require $6,000 outright, but the calendar spread requires around $1,000 because SPAN recognises the legs mostly cancel.
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.The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
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