Rates & Conditions

MARGIN & STOP-OUT

When trading Contract Options with Saxo Bank, one might be able to cover potential losses involved on holding a position in the underlying instrument. That is the case when selling Contract Options short.

In case of a margin breach and stop-out is triggered, all Options positions will be closed.

TRADING SHORT - MARGIN

A short Option position exposes its holder to the risk of being assigned to deliver the underlying asset, when another market participant who holds a long position exercises his Option’s right. Losses on a short Option position can be substantial when the market moves against the position.

Saxo Bank will charge premium margin to ensure sufficient account value to be available to close the short position and additional margin to cover overnight shifts in the underlying value. The margin charges are monitored in real-time for changes in market values and a stop-out can be triggered when the total margin charge for all margined positions exceeds the client’s margin call profile.

The generic formula for the short option margin charge is:

Short Option Margin = Premium Margin + Additional Margin

SHORT TRADES ON CONTRACT OPTIONS

By default, clients would not be enabled to trade Contract Options short. Short selling of Contract Options is allowed for individually assessed clients who have obtained an advanced margin profile. Please contact your account manager for more information.

PROCEEDING ORDERS:

SUPPORT FOR STOP AND STOP-LIMIT ORDERS

Stop and Stop-Limit orders are subject to support by the exchange on which the contract is traded. The order types available are noted in the pop-up details for each contract.

PARTIAL FILLS

Partial fills may occur on limit orders and the remaining amount stays in the market as a limit order and may be filled within the order duration. Market orders can be filled at numerous levels; the price paid will be the volume weighted average price of all the fills.

EXERCISE & SETTLEMENT

Saxo Bank offers two types of Contract Options as defined by the exchange, American style Options can be exercised online at any time before the expiry, while European style Options can only be auto-exercised at expiry.

When in-the-money, an American style Contract Options position can be exercised into a specific Futures contract position, which is visible on the Account Summary until expiration. Once the Contract Option expires, the position stays visible on the Account Summary until the settlement day (instrument-specific). A European style Option, when in-the-money, is only exercised at expiry and is cash settled

FULL PREMIUM vs. FUTURE STYLE PREMIUM

When acquiring a long position in a full premium Contract Option, the premium amount is deducted from the client’s cash balance. Value from an open long Option position will not be available for margin trading other than indicated in the margin reduction schemes. Saxo Bank will treat future style premium Options as deferred premium.

As such, other than market conventions, unrealized profit/loss is not processed in the clients cash balance on a daily basis. Instead, the original premium amount will remain on the transactions not booked until final settlement of the Option or when the position is closed. In this way, all other values in the account summary can be treated equal to full premium Options.

DEACTIVATION OF THE UNDERLYING ASSET

If the Exchange deactivates the underlying asset, Saxo Bank will notify its clients and remove the related positions from the clients trading accounts.