Review our margin requirements and other information related to margin trading with Saxo
To create a buffer between your trading capacity and the margin close-out level, which ESMA has standardised, we apply two different margin requirements:
- Initial margin: a pre-trade margin check on order placement, i.e. on opening a new position there must be sufficient margin collateral available on account to meet the initial margin requirement.
- Maintenance margin: a continuous margin check, i.e. the minimum amount of margin collateral that must be held on account to maintain an open position(s). Maintenance margin is used to calculate the margin utilisation.
The margin requirement on FX options is calculated per currency pair, (ensuring alignment with the concept of tiered margins as per FX spot and forwards) and per maturity date. In each currency pair, there is an upper limitation to the margin requirement that is the highest potential exposure across the FX options and FX spot and forward positions, multiplied by the prevailing spot margin requirement. This calculation also takes into account potential netting between FX options and FX spot and forward positions.
On limited risk strategies, e.g. a short call spread, the margin requirement on an FX options portfolio is calculated as the maximum future loss.
On unlimited risk strategies, e.g. naked short options, the margin requirement is calculated as the notional amount multiplied by the prevailing spot margin requirement.
Tiered margin rates are applicable to the FX options margin calculation when a client's margin requirement is driven by the prevailing FX spot margin requirement, and not the maximum future loss. The prevailing FX spot margin levels are tiered based on USD notional amounts; the higher the notional amount potentially the higher the margin rate. The tiered margin requirement is calculated per currency pair. In the FX options margin calculation, the prevailing spot margin requirement in each currency pair is the tiered, or blended, margin rate determined on the basis of the highest potential exposure across the FX options and FX spot and forward positions.
Example 1: Short Call Spread or Limited Risk strategy
You sell a call spread on 10M USDCAD at strikes 1.41 and 1.42.
The current spot rate is 1.40.
The margin requirement will be the maximum future loss of 71,429 USD (10M x (1.42 – 1.41) = 100,000 CAD / USD @ 1.40).
Example 2: Unlimited Downside Risk
You sell a 10M USDCAD put option. You have an unlimited downside risk. The margin requirement is therefore calculated as the notional amount multiplied by the prevailing spot margin requirement.
The prevailing spot margin rate is determined by the highest potential exposure, which is 10M USD.
Thus, the prevailing spot rate is the blended margin rate of 2.2% ((1% x 3M USD + 2% x 2M USD + 3% x 5M USD) / 10M).
The margin requirement is therefore 220,000 USD (2.2% x 10M USD).
The FX option margin calculation does not apply to Touch options, however open positions will affect the amount you have 'Available for Margin Trading' as displayed in the Account Summary.
Therefore, if margin positions are held on the account, the 'Margin Utilisation' will increase when adding Touch option positions.
Note. Before opening the position a pre-check will be done to ensure that you cannot accidentally open a Touch option position that will move the Margin Utilisation above 100%.
Collateral rates for margin trading
Please note, from 14 October 2019 at 14:00 GMT, only clients who are classified as Professional are allowed to use non-cash collateral (e.g. stocks/bonds) for margin trading.
Clients who are classified as Retail, are required to use cash as collateral for margin trading.
Saxo Bank allows a percentage of the investment in certain Stocks and ETFs to be used as collateral for margin trading activities. The collateral value of a stock or ETF position depends on the rating of the individual stocks or ETFs – please see conversion table below.
|Collateral value of position|
Example: 75% of the value of a position in a Stock or ETF with Rating 1 can be used as collateral (instead of cash) to trade margin products such as Forex, CFDs, Futures and Options. Please note that Saxo Bank reserves the right to decrease or remove the use of Stock or ETF investment as collateral for large position sizes, or stock portfolios considered to be of very high risk.
For a complete list of available stocks, ratings and collateral values, please click here.
For a complete list of available ETFs, ratings and collateral values, please click here.
Saxo Bank allows a percentage of the investment in certain bonds to be used as collateral for margin trading activities.
The collateral value of a bond position depends on the rating of the individual bond, as outlined below:
|Rating definition*||Collateral percentage|
|Highest Rating (AAA)||95%|
|Very High Quality (AA)||90%|
|High Quality (A)||80%|
Example: 80% of the market value of a bond position with an A rating can be used as collateral (instead of cash) to trade margin products such as Forex, CFDs or Futures and Options.
Please note that Saxo Bank reserves the right to decrease or remove the use of bond positions as collateral.
For further guidance or to request the rating and collateral treatment of a specific or potential bond position, please send an email to firstname.lastname@example.org or contact your account executive.
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