Margin trading

 

 

Margin Trading

Client Margin Profiles

Saxo Bank operates with two clients’ margin profiles for Contract Option trading:

Basic profile (default) enables clients to buy Contract Options long calls and puts only.

Advanced profile (per request) for individually assessed clients, gives clients the same rights as the basic profile and in addition, the ability to write (sell short) Options and receive margin benefits on Options’ strategies (combination of Options and / or underlying positions).

Margin and Stop Out

When trading Contract Options with Saxo Bank, it is possible to cover potential losses involved on holding a position in the underlying
instrument. This is true when selling Contract Options short.
In the case of a margin breach and stop-out being triggered, all Options positions will be closed. If a stop-out is triggered by trading other margin products (such as FX, CFDs, Futures) long Contract Options positions will also be included in the stop-out.

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.

Trading Short - Margin

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.
Updated 1st March, 2013