Margin requirements

 

 

FX Vanilla Options Margin

Margin Profile

The margin calculation ​for FX Vanilla option at Saxo Bank take into account changes in:

  • Volatility
  • Spot price of the underlying asset
  • Already open positions

Volatility Factor

Volatility Factors are set per Currency Pair and Expiry Date tenor (see table below). Between these Expiry Date tenors the Volatility Factors are interpolated (see graph below).
 
The Volatility Factors for short-dated Expiry Dates are higher than those for long dated Expiry Dates because the volatility of a long-term Forex Option position is relatively less dynamic than a short-term Forex Option position.
 
When calculating the Vega Margin requirement for a Forex Option position, netting is performed across each Currency Pair for each Expiry Date. Thus, if a client has both bought and sold Forex Options in the same Currency Pair and for the same Expiry Date, the Vega Margin is calculated as the net of these positions.
 
See the sample calculation for an example of this.
 
The Volatility Factors used in the Vega Margin calculation for major and minor currency pairs are shown below in tabular and graphical form. As noted above, Volatility Factors are interpolated between the expiry date tenors.
 
​Tenor ​ ​Days ​ Major Currency Pairs​ Minor currency Pairs​
Short Positons​ ​Long Positions Short Positions​ ​Long Positions
1 week​ ​7 ​28% ​-28% 50%​ ​-50%
2 weeks​ 14​ 20%​ -20%​ 25%​ -25%​
1 month​ 30​ 11%​ -11%​ ​20% -20%​
3 months​ 90​ 8%​ -8%​ ​15% -15%​
1 year​ 365​ 8%​ -8%​ ​10% -10%​
 
 


The next table shows the categorisation of currencies for Major Currency Pairs. With respect to these Volatility Factors, a Major Currency Pair is one which includes BOTH of any of the currencies listed.
 
Major Currencies​ ​
AUD​ ​JPY
​CAD ​NOK
​CHF ​NZD
​EUR ​SEK
​GBP ​USD
 

Exceptions for bought Options

There is no margin required to hold long FX Vanilla Option positions if:

  • You hold no sold options, and
  • You hold no FX spot positions in the same cross.
If you only hold bought FX Vanilla Options, then no margin is required to hold the FX Vanilla Option positions. However, cash is required to pay the Premiums for the bought Forex Options.
 
If you, in addition to bought options, choose to trade in margin instruments (Spot forwards, or options​) that would change the delta exposure in your existing portfolio. Hence, the Delta and Vega margin methodology applies to the entire portfolio in the given currency cross(es).

This would include an option being exercised into a Spot trade at expiry. Squared positions for FX Vanilla or Forex spot are not taken into consideration.

Risk Warning

Margin requirements can change without prior notice. Saxo Bank reserves the right to increase margin requirements for large position sizes, including client portfolios considered to be of very high risk.

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.

See our Risk Warning.
Updated 28 January, 2015

 

 

FX Touch Options

Margin effect

Although Touch Options are not margin products, positions will affect the amount you have 'Available for Margin Trading' as seen in your Account Summary.

Therefore, if margin positions are held on the account, the 'Margin Utilisation' will increase when adding Touch Option positions.

Note that before opening the position a pre-check will be carried out to ensure that you cannot accidentally open a Touch Option position that will move the Margin Utilisation above 100%.

Stop Out procedure

As FX Touch Options at Saxo Bank are not margin products, they are not included in a potential stop out.

It is possible for significant currency revaluation to increase the pay-out liability of a shorted Touch Options beyond the Account Value. In this case additional funds may be required to cover the short fall.

Updated 1st March, 2013