A short Option position exposes its holder to the risk of being assigned to deliver the underlying asset, when another market participant who holds a long position exercises his Option’s right.
Losses on a short Option position can be substantial when the market moves against the position.
Saxo Bank will charge premium margin to ensure sufficient account value is available to close the short position and additional margin is available to cover overnight shifts in the underlying value.
The margin charges are monitored in real-time for changes in market values and a stop-out can be triggered when the total margin charge for all margined positions exceeds the client’s margin call profile.
The generic formula for the short option margin charge is:
Short Option Margin = Premium Margin + Additional Margin
Margin Trading carries a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors.
Ensure you fully understand the risks involved and seek independent advice if necessary.