SPAN What is the margin? Why is it important

SPAN Algorithm principle

SPAN = Standard Portfolio Analysis of Risk

Developed by the Chicago Mercantile Exchange (CME), it is the industry standard for global options margin calculations.

Core logic:

The margin is not simply calculated based on the nominal value, but based on the value at risk (VaR) model:

1. Scan various possible change scenarios of the underlying price (different ranges of rise/fall)
2. Calculate your portfolio profit and loss for each scenario
3. Take several worst-case scenarios and calculate potential losses
4. Margin = the amount required to cover these potential losses

To put it simply: SPAN counts "how much you may lose", not "how much you bought".

Why you need to estimate

Before opening a position:

• Know how much capital is involved in this transaction
• Properly plan positions to avoid excessive concentration
• Make sure you have enough cash to cover margin calls

Different brokers vary greatly:

The estimate of Hyperstock helps you know the approximate figure in advance without waiting for the brokerage system to display it.

Prediction capabilities of Hyperstock

Algorithm basis:

• Illustrative buying-power estimate; broker controls actual requirement
• Consider underlying price fluctuations, volatility changes, and time decay
• Optimization for individual stock options (simplified version of non-futures portfolio)

Accuracy:

• The actual margin gap with mainstream brokers (IB, Tiger, Futu) is usually within 10%
• A few highly volatile targets may have large deviations

limit:

• Different brokers have different policies, our estimates are not precise values.
• The net margin effect of portfolio positions is not fully considered
• Please refer to your brokerage’s actual requirements.

In Hyperstock analysis results, an estimated buying-power effect is shown for reference. Your broker's requirement controls.

Practical suggestions

• Sell Put Check the margin estimate first to make sure the funds are sufficient
• The margin occupied by a single target ≤ 10% of the total funds
• Reserve 30% cash for margin calls
• In a high volatility environment (VIX > 25) brokers may increase margin requirements