Contract Options Trading Conditions
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.
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.
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 apart from the last trading day.
- 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.
Holders of a long position in American Style options can exercise the option any time prior to expiry, except on the last trading day. To exercise a long option position, an exercise request can be entered in the trading application; in the "Account Summary".
When the exercise request is entered, the option position is closed at price 0 and a position in the underlying instrument is created at the strike price. This happens instantly.
Clients should always consider closing the option position in the market and acquiring the underlying instrument separately. Often the market value of the option exceeds the unrealized profit from opening the underlying position at the strike price.
Currency options on CME are not allowed to be exercised out of the money, hence these requests will be cancelled once encountered.
Exercise requests need to be entered before the exercise cut-off time as specified by Saxo Bank; see these in Contract Options Settlement Conditions. The Exercise cut-off time facing Saxo Bank clients is prior to the cut-off times as defined by the exchange in order to give Saxo Bank and its brokers the time to forward the request to the exchanges. If exercise requests are entered after the cut off time clients will be rejected and the client must wait until the next day to exercise before the cut off time.
On the last trading day, clients will not be able to exercise any position, since the expiry auto-exercise process will manage exercising against the exercise settlement value.
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.
Some exchanges can have different thresholds to determine if an option is OTM or ITM. Typical convention is just one tick ITM, though e.g. for Hong Kong stock options, an option is only being exercised/assigned if it is at least 1.5% ITM. Otherwise the options are considered being OTM.
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.
If the Exchange deactivates the underlying asset, Saxo Bank will notify its clients and remove the related positions from the clients trading accounts.
The tax will be applied to all Italian Derivatives whose underlying assets are equity instruments issued by Italian companies. The Italian FTT for Derivatives applies irrespective of the location of the client or the jurisdiction of the transaction, so everyone trading Italian Derivatives will have to pay new Italian FTT for Buys and Sells.
|Notional Value (EUR)||0-2.5k||2.5-5k||5-10k||10k-50k||50-100k||100-500k||500-1,000k||Over 1,000k|
Updated 06 Jan 2017
Under the Commission Delegated Regulation (EU) 2017/2154 of 22 September 2017 (Indirect Clearing Regulation), Saxo Bank A/S must give clients with access to exchange-traded futures or listed on European exchanges, the choice of how their trade positions are held in clearing.
Net Omnibus Indirect Account (NOIA)
Futures and Options are currently and by default cleared in a Net Omnibus Indirect Account where clients’ margin collateral and positions are held with margin and positions of other indirect clients.
Please be informed that Saxo Bank A/S per default will clear European futures and ETOs on a NOIA structure unless clients request otherwise.
Gross Omnibus Indirect Account (GOIA)
The Indirect Clearing Regulation requires us to also offer clearing under a Gross Omnibus Indirect Account where clients’ positions are held in a segregated account at the European Central Counterparty (CCP).
Details of clearing arrangements and the risks associated with both NOIA and GOIA accounts are described here.
If clients choose to clear European futures and ETOs under GOIA, Saxo Bank A/S will charge the following setup, maintenance and usage fees:
- A one-off setup fee of EUR 1,500 per exchange
- A monthly maintenance fee (variable) per exchange
- EUR 25 per cash transfer into or out of a Gross Omnibus Indirect Account Note that Gross Omnibus Indirect Account structures require strict segregation and it is not possible to bundle transfers.
Please contact Saxo Bank A/S in case of questions.