What is the exposure margin?

The exposure margin, also known as additional margin, is an extra margin imposed by the exchange on top of the SPAN margin in the F&O (futures and options) market. It serves as an additional buffer to cover potential losses beyond those accounted for by the SPAN margin. The exposure margin is determined by factors such as market volatility, liquidity, and the risk associated with specific trading positions. Its purpose is to ensure that traders maintain sufficient funds to fulfil their obligations and mitigate the risk of default.