Contract Options Trading Conditions

 

 

Contract Options Trading Conditions

Short trades on Contract Options

By default, you will 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.

Orders Processing

Support for Stop & 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.

Stop orders are by definition “Stop if Traded” orders meaning a stop order can only be triggered if it trades for a minimum of one lot in the market. As the price of the Contract Option moves with the underlying, you can be in a situation where you reach the level of your stop, but the stop is not triggered as no one is trading on the strike.

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 and 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.

Expiry and Auto Exercise

When trading Contract Options at Saxo Bank, all Options positions are subject to an auto exercise procedure at expiry:

  • All long positions on in-the-money Options are assumed to be exercised
  • All short positions on in-the-money Options are assumed to be assigned
  • All positions on out-of-the-money Options are abandoned

A Call Option is in-the-money when the strike price is below the market price of the underlying asset.

A Put Option is in-the-money when the strike price is above the market price of the underlying asset.
 
Abandonment of in-the-money positions is not supported. Thus, clients should close their Option positions prior to expiry.

Full premium vs. Futures 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.

Updated 31 July 2012