Prop traders, through broker associations such as Association of NSE Members of India (ANMI), Commodity & Capital Markets Association of India and BSE Brokers Forum, propose that their margin to trade would never exceed the collateral they’ve parked with banks from whom they avail of funding for meeting margin (SPAN) requirements. This is possible because of the offsetting trades they take, such as buying a call option at one strike price and selling another call at a higher strike price, which reduces risk sharply.
