Saxo’s FX Vanilla option offering provides the possibility to both buy and sell European style options, giving clients the opportunity to express a directional view in two different ways. FX options not only enable clients to express a directional trading view but also offer more alternatives in relation to controlling risk, in addition to a traditional stop loss order.
The holder of an option (long) pays a premium for the right to exercise the option at a profit, or let the option expire with no further obligation. The writer of an option (short) receives the premium and assumes the possible liability of having to pay the difference between the strike price and market price at maturity.
The pricing model Saxo applies for FX Vanilla options is based on an implied volatility surface for the Black-Scholes model. The price is calculated in pip terms of the 2nd currency. Pricing is available for options with maturities from 1 day to 12 months, providing you with maximum flexibility to implement your trading strategies and market views.
|Level 1||Level 2||Level 3|
|Volume USDm (monthly) required||0 - 50||50 - 100||> 100|
FX Option Volume-based Pricing serves low-volume traders equally as well as it does high-volume traders. We charge a standard ‘Classic’ spread, with the benefit of improved spreads for larger cumulative trading volume.
- If you trade over 50 million USD, you will be charged a Platinum spread on volume traded up to 100 million USD
- If you trade over 100 million USD, you will be charged a VIP spread on volume traded in excess of 100 million USD
The spread is defined as the distance between the bid/ask price. Spreads may vary depending on the life of the option and the currency pairs.
Saxo reserves the right to apply different spreads for notional amounts exceeding market standard or for client requiring a specific level of service.
Trades can not be executed below the minimum trade size. Minimum trade sizes are as follows:
XAUUSD: 10 Oz
XAGUSD: 100 Oz
NOK/SEK: 50,000 NOK
All others: 10,000 units of base currency
Request for Quote (RFQ) on amounts above the maximum streaming amount will be executed manually by the FX trading desk.
Note. Maximum streaming amounts are subject to change without prior notice.
Small trade sizes incur a minimum ticket fee of 10 USD. A small trade size is any trade below the commission threshold which for most currency pairs is 50,000 units of base currency, however variations occur. Full details can be found here.
FX Options Risk Warning
An option is categorised as a red product as it is considered an investment product with a high complexity and a high risk.
You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date
Certain options markets operate on a margined basis, under which buyers do not pay the full premium on their option at the time they purchase it. In this situation you may subsequently be called upon to pay margin on the option up to the level of your premium. If you fail to do so as required, your position may be closed or liquidated.
If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received.
By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you; however far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited.
If you do not own the underlying asset the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detail of the applicable conditions and potential risk exposure.
Danish banks are required to categorise investment products offered to retail clients depending on the product’s complexity and risk as: green, yellow or red. For more information click here