What is an intra commodity spread?

Intra-Commodity Calendar Spread: This is a futures spread in the same commodity market, with the buy and sell legs spread between different months. For instance, a trader could buy a March wheat futures contract and sell a September wheat futures contract.

How does CME SPAN work?

How the CME SPAN Methodology Works. The CME SPAN methodology evaluates overall portfolio risk by calculating the worst possible loss that a portfolio of derivative and physical instruments might reasonably incur over a specified time period (typically one trading day).

What is Scan risk array?

SPAN uses the risk arrays to scan probable underlying market price changes and probable volatility changes for all contracts in a portfolio, in order to determine value gains and losses at the portfolio level. This is the single most important calculation executed by the system.

What is composite Delta?

• Composite Delta is derived as the weighted average of the deltas, where the. weights are associated with each underlying price scan point.

What is inter spread?

An intermarket spread refers to the price differential between two closely related commodities futures contracts. Traders can employ an intermarket spread strategy by simultaneously buying and selling such closely related contracts, believing that the spread will widen or tighten.

What is SPAN risk?

The Standard Portfolio Analysis of Risk, or SPAN, is a system for calculating margin requirements for futures and options on futures. It calculates the likely loss in a set of derivative positions (also called a portfolio) and sets this value as the initial margin payable by the firm holding the portfolio.

What is span and exposure margin?

SPAN Margin is the minimum requisite margins blocked for futures and option writing positions as per the exchange’s mandate. The ‘Exposure Margin’ is the margin blocked over and above the SPAN to cushion for any MTM losses. The entire initial margin (SPAN + Exposure) is blocked by the exchange.

What is volatility scan range?

In market parlance, the volatility scan range refers to a range within which the implied volatility might reasonably be expected to move in one day. For low volatility commodities, Sebi has prescribed a minimum VSR of 4 per cent for non-agricultural goods and 5 per cent for agricultural goods.

What is span option margining?

What Is Span Margin in Options Trading? In options trading, SPAN margin functions as collateral to cover against possible adverse price movements. SPAN is the minimum margin requirement needed to transact a futures or options trade in the market.

What is net option value?

Net options value is the credit or debit value of all options positions combined, marketed-to-the-marketer. For example, when a trader purchases an options contract, they are given a net options value credit, which reflects the value of their options contract.