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. On unlimited risk strategies, e. 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; a 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.
The current spot rate is 1. The margin requirement will be the maximum future loss of 71, USD 10M x 1. 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. The margin requirement is therefore , USD 2. For additional examples click here. 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.
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.
Losses can exceed deposits on margin products. Please ensure you understand the risks. Apple, iPad and iPhone are trademarks of Apple Inc. App Store is a service mark of Apple Inc. FX Expiry Margin calculation 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.
View FX Margin Policy. Touch Options 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. FX Options Risk Warning. Your browser cannot display this website correctly. Our website is optimised to be browsed by a system running iOS 9. X and on desktop IE 10 or newer. If you are using an older system or browser, the website may look strange.
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