CME's newer margin framework, which replaces SPAN's fixed scenario grid with a value-at-risk model plus explicit add-ons for liquidity and concentration.
Classic span-margin prices a portfolio across a fixed grid of price and volatility scenarios and takes the worst outcome. SPAN 2 keeps the portfolio approach but bases the core requirement on a historical value-at-risk calculation, then layers charges for large positions, illiquid months and stressed correlations.
For a simple directional trader the number looks similar. For portfolios with many offsetting legs, SPAN 2 tends to charge more where the offsets rely on correlations that break in a crisis, and less where the hedge is genuinely tight.
Example: a book of 500 calendar spreads that SPAN treated as almost riskless might carry a $40 per spread requirement under SPAN, and $65 under SPAN 2 once a concentration add-on for holding 500 of them is applied.
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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