Calendar spread charge
Also written Calendar spread margin
The reduced margin on offsetting positions in the same underlying across different expiries: 1.75% of the far-month contract for index derivatives, 2.2% for single stock derivatives.
In plain language
A trader who is long a near-month futures contract and short a far-month contract on the same underlying is not exposed to the market's direction in the way a one-sided trader is. If the price falls, the long loses and the short gains. What remains is the risk that the two months move by different amounts.
Charging full margin on both legs would overstate that risk. So the clearing corporation charges a calendar spread charge instead: a smaller margin, set as a percentage of the far-month contract.
The benefit has one big exception. On the day a contract expires, the expiring leg can behave very differently from later months, so the spread benefit is withdrawn for contracts expiring that day.
How it works
Rates (Chapter 4, section 4.1.2.1):
| Product | Calendar spread charge |
|---|---|
| Index derivatives | 1.75% of the far month contract |
| Single stock derivatives | 2.2% of the far month contract |
Delta basis. For futures and options on indices and individual securities, the margin on calendar spread positions is calculated on the delta of the portfolio in each month. A near-month option with delta 100 and a far-month option with delta -100 bear the same spread charge as long 100 near-month futures and short 100 far-month futures.
Expiry day. Given very large expiry-day volumes and enhanced basis risk, SEBI decided that the calendar spread benefit is not available on the day of expiry for contracts expiring that day. A SEBI circular dated February 05, 2026 clarified that margins for calendar spreads remain unchanged for all other expiries. The workbook's illustration: with expiries on the 29th, 30th and 31st, spreads involving the 29th lose the benefit on the 29th, but a 30th/31st spread keeps it.
Extreme loss margin. On calendar spread futures positions, ELM is levied on one third of the value of the open position of the far month futures contract. Where one leg expires that day, ELM is computed without treating it as an offsetting spread.
Calendar spread margin is also one of the SEBI-framework margins exchanged between clearing corporations under interoperability.
The formula
Calendar spread charge = rate x value of far month contract
- rate = 1.75% (index derivatives) or 2.2% (single stock derivatives)
ELM on a futures calendar spread = ELM rate x (1/3 x value of far month futures position)
A worked example
Contract values are illustrative; the percentages are the workbook's.
A trader is long one near-month index futures contract and short one far-month index futures contract. The far-month contract's value is Rs 12,00,000.
- Calendar spread charge = 1.75% x Rs 12,00,000 = Rs 21,000
- ELM on the spread = index futures ELM of 2% on one third of the far month value = 2% x Rs 4,00,000 = Rs 8,000
Total on this spread: Rs 29,000, far less than margining each leg as a naked futures position.
The same structure in a single stock with a far-month value of Rs 12,00,000 would carry a spread charge of 2.2% x Rs 12,00,000 = Rs 26,400.
On the near month's expiry day, the near-month contract expires. The trader loses the spread treatment on that day: the far-month short is margined as a stand-alone position, and for ELM the expiring leg is not treated as an offset.
Why NISM asks about it
Chapter 4 (Risk Management, section 4.1.2.1 Types of Margins) sets out the calendar spread charge rates, the delta basis, the removal of the benefit on expiry day and, under Extreme Loss Margin, the one-third rule. Chapter 5 (section 5.2) lists calendar spread margin among the margins clearing corporations exchange under interoperability. Questions test the two percentages, which contract they apply to (the far month), and the expiry-day exception.
Common exam traps
- 1.75% is index; 2.2% is single stock. The numbers are easily swapped.
- The base is the far month contract, not the near month and not the sum of both legs.
- The expiry-day withdrawal applies only to spreads involving the contract expiring that day. A spread between two later expiries keeps its benefit.
- ELM on a futures calendar spread is on one third of the far month value, not on the full value.
- Workbook wording to watch: the section says SEBI removed the benefit on expiry day generally, while the footnoted February 05, 2026 circular is titled as a review of calendar spread margin benefit in single stock derivatives on expiry day. If a question distinguishes index from stock on this point, read it closely.
- Calendar spread charge is a margin concept. It is not the "calendar spread" trading strategy itself.
Where this is taught
- Series IV · Chapter 7: Clearing, Settlement and Risk Management of IRDintroduced here
- Series I · Chapter 7: Clearing, Settlement and Risk Management in ETCDintroduced here
- Series VII · Chapter 4: Risk Managementintroduced here
Related terms
- Extreme Loss MarginA flat 3.5 per cent margin collected on cash-market positions to cover losses falling outside what the VaR margin is designed to capture.
- InteroperabilityA clearing member choosing one clearing corporation to clear and settle everything it trades, across all exchanges, instead of being tied to a separate clearing corporation per exchange.
- Net Option ValueMarket value of a clearing member's long option positions minus its short option positions, added to (or subtracted from) its Liquid Net Worth so option gains and losses hit capital without cash settlement.
- SPANThe scenario-based system clearing corporations use to compute initial margin — it revalues a client's whole derivatives portfolio under sixteen what-if scenarios and charges the worst loss.
- Horizontal spreadTwo options of the same type and the same strike but different expiries — a position whose entire value is the difference between the two legs' time values, not a view on direction.
- Initial marginThe deposit both the buyer and the seller of a futures contract must place before the position is accepted, sized to cover a 99% worst-case one-day loss on that position.
- Inter-bond spreadA long-short position in futures on two different GOI bonds, usually of the same expiry, taken to express a view on how the yield curve will steepen or flatten.
- Cross marginingReduced margin on a client's positions in the cash and equity derivatives segments that offset each other, with only a spread margin of 25% to 40% of the normal margin charged.
- Margin Period of RiskThe time horizon, subject to a minimum of 2 days, that a clearing corporation must estimate for each equity derivatives product and use to scale up SPAN's 99% value-at-risk initial margin.
- Naked positionA long or short position in a futures contract held without any position in the underlying asset or an offsetting contract — fully exposed to price moves in one direction.
- Calendar spreadA long position in futures of one maturity and a short position in futures of another maturity on the same underlying. It is a bet on the price gap between the two months, not on market direction.