Margin trading

 

 

Margin Trading

Client Margin Profiles

With regards to Contract Options trading Saxo Bank operates with two clients’ margin profiles:

Basic profile (default) enables clients to buy Contract Options long calls and puts only.

Advanced profile (per request) for individually assessed clients, enables clients to do the same as the basic profile as well as to write (sell short) Options and receive margin benefits on Options’ strategies (combination of Options and / or underlying positions).

Margin and 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. If a stop-out is triggered by trading other margin products (such as FX, CFDs, Futures) long Contract Options positions will also be included in the stop-out.

Margin Trading carries a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors.

Ensure you fully understand the risks involved and seek independent advice if necessary.

See our Risk Warning.

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

Margin Trading carries a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors.

Ensure you fully understand the risks involved and seek independent advice if necessary.

See our Risk Warning.
Updated 21st June, 2012