SPAN Margin

Span margin: a phrase you don't mind hearing at your gymnastics lesson, but one you'd rather avoid at either the gynecologist’s or proctologist's office.

In the financial world, SPAN represents a particular system for measuring risk. It's a series of algorithms designed to look at a trader's portfolio and determine the level of risk it implies.

The goal of the SPAN margin is to determine the margin requirements for a particular account. "Margin" in this case refers to the money a trader can borrow with which to trade. When they borrow, they have to keep their accounts above a certain value at all times, so that their broker (who lent them the cash) knows that they're reasonably assured of getting their money back if they need to conduct a margin call.

However, determining the proper minimum requirement gets tricky, especially if traders are dealing in complicated investments, like options. The value of these can change quickly, so keeping up with an evolving portfolio takes some complicated math and a good deal of vigilance.

Luckily, the SPAN system can do both automatically. The SPAN margin thus calculates the appropriate margin requirement, using its complex risk-computing models, giving a reliable reading for the risk levels of a particular trader's account on any given day.