OPTIONS - PRICING

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OPTIONS - PRICING

UK 100 Options: Spreads start from 4.8pts*, minimum stake £1/pt

Germany 40 Options: Spreads start from 6pts*, minimum stake £1/pt

SPX 500 Options: Spreads start from 1pts*, minimum stake £1/pt

US Tech 100 Options: Spreads start from 8pts*, minimum stake £1/pt

Wall Street Options: Spreads start from 40pts*, minimum stake £1/pt

The margin requirement for buying an index option is the minimum of the stake multiplied by the premium or the margin required to trade the same stake in the underlying.

The margin requirement for selling an index option is the margin required to trade the same stake in the underlying.

*Spreads are subject to change depending upon the prevailing market conditions such as especially volatile market conditions, the liquidity of the underlying market, time to expiry, quarterly vs serial option and the option premium.

Options FAQs

WHAT IS

THE MINIMUM BET SIZE?

Minimum bets on options are £1 per point movement.

WHAT IS

AN OPTION?

An Option is a Financial Derivative that enables people to benefit on the rising or falling prices of a particular asset without the same risk associated with holding a position in a regular futures or equities trade. Options allow the buyer of the Option the right (but not the obligation) to buy or sell an asset on a specific date or before as a pre-determined price.

We offer two kinds of Options: Calls and Puts. These are offered at a range of different strike prices and options bets can be made in either direction (Buy or Sell).

Option trades are usually cash settled however, the underlying option may be exercised by or against you in delivery of the underlying security or derivative. You may be liable for any charges incurred when taking or providing delivery of the underlying security or derivative, this could include but is not limited to dividend payments or interest rate changes.

WHAT IS

THE MARGIN ON AN OPTION?

For long positions we will margin you at 100% of the premium of the option. For example, if you buy £10 of an option @ 45 then this will take up £450 in margin requirement.

For short positions you will be margined at the same rate as the equivalent underlying market. For example, an option position in the UK 100 where you went short would be margined at Stake x 5% of UK 100, Daily.

Please note, if you have multiple options positions open at once then your total margin requirement may be greater than or less than the sum of the individual positions. This is done to take into account, as accurately as possible, the equivalent stake size you have in the underlying market. For example, if you were short £200 of a UK 100 7400 call option and also short £100 of a UK 100 7500 call option then this would be equivalent to being short £300 of the UK 100, Daily. Conversely, if you were instead short £200 of a 7400 call option and short £100 of a 7500 put option then this would be equivalent to being short only £100 of the UK 100, Daily. The different risk profiles of these two examples may, therefore, lead to your total margin requirement being higher or lower, respectively, than simply summing the margin requirement of each leg in isolation. Any such margin override is applied purely at the discretion of the trading team. Should you have any questions on this aspect, or any other aspect of how we calculate the margin requirement on option positions then please get in touch with our trading team by calling 08000 526 570.

WHAT IS

A CALL OPTION?

A Call Option gives the buyer the right but not the obligation to buy the underlying security or derivative at a specific price (the strike price) on a pre-determined date in the future (the expiry date).

WHAT IS

the Strike Price?

The Strike Price is the level at which the underlying can be bought or sold on expiry of the option.

For a call option, the strike price is the level at which the buyer of the option could notionally buy the underlying market. For example, the buyer of a UK 100 call option with a strike price of 5600 gives the option buyer the right, but not the obligation, to buy the UK 100 at 5600 on expiry.

For a put option, the strike price is the level at which the buyer of the option could notionally sell the underlying market. For example, the buyer of a UK 100 put option with a strike price of 6200 gives the option buyer the right, but not the obligation, to sell the UK 100 at 6200 on expiry.

WHAT IS

THE BREAK EVEN LEVEL?

The Break Even level is the point at which no profit or loss is realised.

For Example, if you bought a UK 100 call option with a strike price of 5700 quoted at a premium of 54 – 57 you would need the underlying to be trading at 5757 to reach the Break Even level whereby you would not be making or losing any money.