Forex Options Trading Rates

Forex Options Trading Conditions

What is an option?

An option grants the buyer the right, but not the obligation to buy or sell the underlying asset at an agreed price "the strike price" on a set date. A Call Option grants the buyer the right to buy the underlying asset. Maximum loss is the premium paid up front and the maximum profit is unlimited.

The seller of a Call Option is obliged to sell the underlying asset at the agreed strike. Maximum loss is unlimited and maximum profit is limited to the premium received.

A Put Option grants the buyer the right to sell the underlying asset. Maximum loss is once again the premium paid up front and the maximum profit is unlimited.

The seller of a Put Option is obliged to buy the underlying asset at the agreed strike. Maximum loss is unlimited and maximum profit is limited to the premium received.

Hence the risk as a seller of naked options, with no underlying asset, is very risky. Buying a Call Option always implies a Call on a currency, and a Put on the other currency in the currency pair, and vice versa

What is an OTC Trade?

"Over-the-Counter" (OTC) products are products that are not traded on an Exchange. Rather, they are traded between counter parties. Whereas Exchange Traded products are standardized, OTC products are customisable to suit the needs of the counter parties.

Ticket Fees

For trades below the Ticket Fee Threshold, a small ticket fee of USD 10 is added to the trade to cover administration costs.

Forex Options Margin Requirements

In case of short selling of Forex Options, margin requirements for Forex Options take into account changes in:

• Volatility
• Spot price of the underlying asset
• Open positions (that effectively reduce the risk associated with your Options positions)

Note: Margin rates are higher over the weekends. Weekend margin rates apply from Friday C.E.T. 18.00 hours to Sunday C.E.T 22.00 hours and on non-banking days.

Margin Calculations

Margin requirements for Forex options consist of a:

• Delta Margin which is related to the exposure due to changes in the spot market
• Vega Margin which is related to changes in the volatility of the underlying spot Forex cross

This margin calculation system nets open Spot positions against Options, resulting in generally lower margin requirements.

Exercise procedure

Options that are "in the money" are automatically exercised at 10:00 New York time (New York cut) on the day of expiry, where they are converted to a spot position. This spot position is subject to the usual profit/loss if the spot price moves from the exercise price. If you already have an offsetting position at exercise, the exercised position will be netted out on the following day.

Can I sell an option?

Yes, uncovered options are possible with HMS TRADER uncovered options are however much more risky as there is no underlying asset to support the option. Only experienced traders should use the facility of selling naked options.
Margin requirement is 10 % of the traded amount, hence a 1 MIO USD contract requires a 100.000 USD margin account balance.