Forex Options Margin Requirements
Margin requirements for Forex Option positions take into accounts changes in:
- volatility.
- spot price of the underlying asset.
- open positions (that effectively reduce the risk associated with your Options positions).
The margins for Forex Options are also subject to a volatility factor that may increase the margin requirements. This factor will be more prominent, the longer the expiry date for the Forex Option is.
Margin Calculations
Margin requirements for Forex Options consist of a:
- Delta Margin which is related to the exposure to changes in the spot market.
- Vega Margin which is related to changes in the volatility of the underlying spot Forex cross.
This allows you to hedge spot positions with Forex Options with lowered margin requirements. This service, previously only offered to Professional Traders, is now available to retail traders.