Pricing Model For Forex Options

Vanilla Options prices


Spreads

The quoted FX Options spreads are for 30 day at-the-money options. Spreads for other strikes and maturities will vary.

See all FX options spreads with live updates

Saxo Bank reserves the right to apply different spreads for notional amounts exceeding market standard or for customers requiring a specific level of service.

Trade Size & Liquidity

Maximum streaming notional amount is 25 million units of base currency; with a minimum ticket size of 10,000 on currency pairs; and for precious metals 10 oz (Gold) and 100 oz (Silver). 
Notional amounts over maximum streaming amount are request for quote (RFQ).

Ticket fee on small trades

Small trade sizes incur a 'Minimum Ticket fee' of USD10 or equivalent in another currency. A small trade that attracts a Minimum Ticket fee is any trade below the 'Ticket Fee Threshold' listed below.

FX Vanilla Option Ticket Fee Threshold
XAUUSD 50
XAGUSD 5,000
AUDSGD, EURCZK, EURHUF, EURPLN, EURTRY, EURUSD, GBPAUD, GBPCAD,
GBPCHF, GBPJPY, GBPUSD, USDCAD, USDCHF, USDHUF, USDILS, USDJPY,
USDMXN, USDPLN, USDSGD, USDTRY, USDZAR, USDRUB, EURRUB
50,000
AUDJPY, AUDNZD, AUDUSD, CADJPY, CHFJPY, EURAUD, EURCAD,
EURCHF, EURGBP, EURJPY, EURNOK, EURNZD,
EURSEK, NZDJPY, NZDUSD, USDNOK, USDSEK
100,000
NOKSEK 1,000,000

Updated 24 June 2016


Touch Options Prices

Pricing Model

When Trading Touch Options the holder (buyer) of an option (long) pays a premium and possibly receives a payout. The seller (writer) of an option (short) receives the premium and possibly has to pay the payout.  The pricing model Saxo Bank uses is similar to the one we apply to Vanilla Options (based on Black-Scholes model), with the price being expressed as a percentage of the payout in the first currency. Spreads vary depending on available liquidity and market conditions.

Trade size & Liquidity

Amount is expressed as the potential payout. Maximum streaming notional amount is 25,000 units of base currency, with a minimum ticket size of 100 units. The price is expressed as a percentage of the payout in the first currency, with tradable tenors from 1 day to 12 months. Notional amounts over maximum streaming amount are request for quote (RFQ).

Pricing / Premium

The price of a Touch Option is called the Premium and is expressed as a percentage (%) of the potential payout. For instance, for a notional size of 1,000 and a price of 10%, the Premium will be 100 units of base currency and the Payout will be 1,000 units of base currency. For long positions you pay the premium and for short positions you receive the premium.

Example:

  • You are looking for a potential payout of EUR 1,000 if EURUSD reaches 1.1500 within two weeks. The price of the One Touch Option is 20%.
  • You the pay EUR 200 (EUR 1,000 x 20%) for the option.
  • If the EURUSD spot price reaches 1.15000 before it expires you receive the pay-out of EUR 1,000 
    (net profit of EUR 800).
  • If it doesn't reach the trigger level of 1.15000 your loss on the trade is the initial premium you paid for 
    the option (EUR 200).
Premium

At Saxo Bank FX Touch Options can be either bought or sold.

Trading Long (buying)
When buying an option, you have to pay the full Premium in cash. The Premium is subtracted from the Cash Balance (initially shown as 'Transactions not booked'. At the end of the day it is subtracted from the Cash Balance).

The current value (positive) of the bought position is displayed in 'Non-margin positions' and subtracted from 'Not available as margin collateral'. Thus, you cannot use the value of Touch Options for margin collateral.
Trading Short

(selling)
When selling (writing) an option, you need to have the cash sufficient for the potential payout in the event of an exercise (One Touch) or expiry (No Touch).The Premium is added to the Cash Balance (initially shown as 'Transactions not booked'. At the end of the day it is added to the Cash balance).

The current value (negative) of the sold position is displayed in 'Non-margin positions'. In order to reserve the full potential payout the difference between the current value and the potential payout is subtracted from 'Not available as margin collateral'. Hence, your full potential loss from the option payout is thus not available for margin collateral.

Updated 30 Oct, 2014

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.

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 further information click here. 

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