The reduction in margin an exchange grants for positions that offset each other, such as two months of the same product.
Offsetting risk deserves offsetting margin, and span-margin grants it mechanically. Intramarket calendars get the biggest credits; recognised intercommodity relationships such as the crush-spread or crack-spread get partial credits at published ratios.
The trap is that the credit assumes the relationship holds. When a spread breaks — and spreads break in exactly the conditions that cause margin increases — the exchange can pull the credit and demand the full outright amount with no notice.
Example: a corn-versus-soybean spread might carry a 60% credit, so two legs needing $2,400 each are margined near $1,900 instead of $4,800.
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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