Capital fx option

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access our self-service support centre, email helpdesk and a range of educational courses.

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Trade FX options on an award-winning platform, capital fx option.

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Trade FX options on an award-winning platform

Access 44 FX vanilla options with maturities from one day to 12 months.

Why trade FX options with saxo markets

Ultra-competitive pricing

Access 44 FX options

Advanced FX option tools

Expert service, trusted for 25 years

Tight, all-inclusive FX option spreads

We offer three levels of pricing depending on your account tier.

Swipe left or right for more

instrument	classic	platinum	VIP
EUR USD	5.0	4.0	3.0
USD JPY	6.0	5.0	4.0
GBP USD	8.0	7.0	5.0
AUD USD	5.0	4.0	3.0
EUR JPY	9.0	8.0	6.0
EUR CHF	8.0	7.0	6.0
XAU USD	180.0	160.0	140.0
XAG USD	9.5	8.8	6.5

Please note that spreads shown are current ATM 1 month spreads. Spreads will vary depending on the life and the strike of the option.

Above spreads for currency pairs are displayed in pips whereas spreads for precious metals are shown in cents.

Receive lower prices as you trade more with our platinum and VIP account tiers. Learn more

Trade with flexibility

Wide range of maturities

Better risk-management

Client-centric approach

Start trading with saxo today

Opening an account takes 5 minutes

Trade FX options with advanced tools

Saxotradergo is our powerful yet easy-to-use platform. Trade from your PC, mac, tablet or smartphone.

Robust option chain functionality

Benefit from extensive charting with 50+ technical indicators, integrated trade signals and innovative risk management tools.

High-quality analytics

Our professional-grade suite of real-time reports provide detailed analysis of FX spot and options positions, across multiple pairs.

More information

Margin requirements

You can review information on margin requirements here.

List of available FX options

Saxo offers a range of 44 FX vanilla options as well as 6 FX touch options (in europe touch options are available for elective professional clients only).

General charges

Find more information about our general charges here.

Trading conditions

You can review our trading conditions for forex options here.

24-hour expert service

Whether you’re a high- or low-volume trader, you’ll receive first-class support tailored to your needs.

Integrated digital support
access our self-service support centre, email helpdesk and a range of educational courses.

24-hour customer service
get support for technical matters and account queries whenever markets are open.

Relationship managers and sales traders
active traders benefit from a dedicated point of contact and access to our world-class trading experts.

Exclusive VIP services
receive our very best prices, priority support and exclusive event invitations.

Trusted for more than 25 years

Fully regulated
we adhere to the strictest regulatory standards, and are fully licensed and regulated in australia. Saxo is regulated in 15 jurisdictions across europe, the middle east and asia.

Financial strength
we’re a financially stable company with a robust balance sheet. We serve clients in 170 countries, hold USD 16bn in AUM and process 1m transactions daily.

Multi-award winner
we’ve been consistently recognised by our industry and have won the highest accolades for our products, platform and service.

See all our products

Forex

Stocks

Commodities

Futures

Listed options

Bonds

Ready to get started?

Opening an account takes around 5 minutes

Democratising trading
and investment for
more than 25 years.

Saxo capital markets (australia) limited
suite 1, level 14, 9 castlereagh st
sydney NSW 2000
australia

Products & pricing

Forex

Cfds

Futures

Commodities

Forex options

Listed options

Stocks

Bonds

Etfs

General charges

Platforms

Accounts & service

General

Other

Across

Losses can exceed deposits on margin products. Please ensure you understand the risks.

The saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.Home.Saxo/en-au/about-us/awards

Saxo capital markets (australia) limited ABN 32 110 128 286 AFSL 280372 (‘saxo’ or ‘saxo capital markets’) is a wholly owned subsidiary of saxo bank A/S, headquartered in denmark. Please refer to our general business terms, financial services guide and product disclosure statement to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as cfds and margin FX products may result in your losses surpassing your initial deposits. Saxo capital markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo capital markets does not take into account an individual’s needs, objectives or financial situation.

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The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website is not intended for residents of the united states and japan.
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We believe that it’s important to to get clear answers to all your questions on the way to successful moneymaking in financial markets.

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In most cases, the recommended starting amount is $1,000. This sum is sufficient for trading any instruments, can withstand a drawdown, allows to hedge volatility risks in currency markets with commodity CFD trades.

After you register, a standard trading account will be created for you automatically. Make a deposit using a bank card, a payment system or cryptocurrency. If you’re depositing via bank card, you’ll have to pass a verification procedure and provide all the necessary documents required by the processing system.

Start trading. First you’ll need to download a trading platform: MT4, MT5 (for experienced traders) or mobile app grand trade (works for everyone), choose an instrument and start trading. The most popular currency pairs for trading are EUR/USD, USD/CHF, USD/JPY, BTC/USD, ETH/USD, LTC/USD.
If you prefer trading commodities, turn your attention to oil, gas and metals, and if you’re interested in stocks and indices, you can choose from our wide selection of these instruments.
If you don’t know what to start with, visit our page for beginners or contact your personal manager through the ticket system in your private office.

What we offer

RAMM is for investment and management. Connect to the available strategies that are proven successful and create your own. The service is fully automated and easy to use, provides a high level of capital protection, allows setting limits for profit and loss, weekly profit.
Recommended initial deposit is $2,000. Minimum amount of investment in one strategy is $50. Open a RAMM account.

Choose an investment portfolio and make money from stocks of major corporations.
Readily available ideas for trading, free advice, high profit rate.
You can also take advantage of our free service and order a custom portfolio.
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We offer 500 instruments for trading: cfds on stocks, indices, metals, commodities, currency pairs, cryptocurrency.
ECN and crypto accounts are available to professional traders. Beginners may be interested in our cent account micro. For the most clients, the recommended account type is standard. Algorithmic trading is available on all accounts, including the possibility to create of your own robots in metatrader 5. The following trading platforms are available at grand capital: metatrader 4 metatrader 5 and the mobile app grand trade.

We set high requirements for liquidity providers and aim to provide the most favorable conditions for your work with the market: small fees, highly liquid instruments, immediate execution, 24/7 support. We allow using any robots and eas, high-margin trading is available. Risk diversification is possible thanks to the variety of accounts and instruments. Our clients are always under the protection of the international financial commission finacom that has an insurance fund of 20,000 euros for every client. Moreover, the funds of our clients are protected by the cutting-edge blockchain technology of serenity escrow that prevents any manipulation with the deposit.

Our support

We profit when you profit.

Grand capital is a provider of technology for trading in currency and derivatives markets since 2006. Over these years, we have become a financial partner of more than 500,000 traders all over the world. Stable and reliable operation of the company paired with its vast experience in the field allowed to implement the concept of a long-term mutually beneficial partnership. High standards of the provided services and technology earned prestigious awards from the professional community. Our work is for the benefit of the client, and our income relies on fees for using our services and instruments.

You become a part of the international trading community and use the most advanced services in the field of trading and investing. You participate in loyalty programs and get firsthand access to new instruments and technologies as they are introduced by the company. Each client gets their own personal manager who will help them become more successful. Working with a stable world-class company, you won’t have to worry about the safety of your funds.

First you need to decide whether you want to work as an independent trader or invest funds. If you plan to trade on your own, start with our classic account standard, recommended deposit amount is $500. Download the mobile app. Visit our page for beginners.

If you plan to start as an investor, open a RAMM account and start copying the top-performing strategies in the rating: it’s really a low-risk and profitable way of earning for investors of any level of experience with any budget.
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Let’s take the next step together

Trade and invest with grand capital broker!

Grand capital is a forex broker that provides high-quality services for online trading in financial markets to clients around the world since 2006. Trading in metatrader 4 and metatrader 5. Over 500 financial assets: currency pairs, cfds on the stocks of global corporations, indices, metals.

Download mobile app for trading
and account management

Only demo accounts currently available

Forex and CFD trading

Deposit/withdrawal

Market analysis

Account management

Forex and CFD trading

Deposit/withdrawal

Market analysis

Account management

Trading instruments

Trade the most popular assets!
We offer a wide variety of financial instruments for online trading, making the market available to you, always and everywhere.

Trade FX options on an award-winning platform

Access 44 FX vanilla options with maturities from one day to 12 months.

Why trade FX options with saxo markets

Ultra-competitive pricing

Access 44 FX options

Advanced FX option tools

Expert service, trusted for 25 years

Tight, all-inclusive FX option spreads

We offer three levels of pricing depending on your account tier.

Swipe left or right for more

instrument	classic	platinum	VIP
EUR USD	5.0	4.0	3.0
USD JPY	6.0	5.0	4.0
GBP USD	8.0	7.0	5.0
AUD USD	5.0	4.0	3.0
EUR JPY	9.0	8.0	6.0
EUR CHF	8.0	7.0	6.0
XAU USD	180.0	160.0	140.0
XAG USD	9.5	8.8	6.5

Please note that spreads shown are current ATM 1 month spreads. Spreads will vary depending on the life and the strike of the option.

Above spreads for currency pairs are displayed in pips whereas spreads for precious metals are shown in cents.

Receive lower prices as you trade more with our platinum and VIP account tiers. Learn more

Trade with flexibility

Wide range of maturities

Better risk-management

Client-centric approach

Start trading with saxo today

Open an account in minutes using your singpass via myinfo

Trade FX options with advanced tools

Saxotradergo is our powerful yet easy-to-use platform. Trade from your PC, mac, tablet or smartphone.

Robust option chain functionality

Easily create and personalise option chains and build links to quickly switch between instruments.

High-quality analytics

Our professional-grade suite of real-time reports provide detailed analysis of FX spot and options positions, across multiple pairs.

Frequently asked questions

Margin requirements

You can review information on margin requirements here.

What are saxo’s general charges?

Find more information about our general charges here.

Trading conditions

You can review our trading conditions for forex options here.

24-hour expert service

Whether you’re a high- or low-volume trader, you’ll receive first-class support tailored to your needs.

Integrated digital support
access our self-service support centre, email helpdesk and a range of educational courses.

24-hour customer service
get support for technical matters and account queries whenever markets are open.

Relationship managers and sales traders
active traders benefit from a dedicated point of contact and access to our world-class trading experts.

Exclusive VIP services
receive our very best prices, priority support and exclusive event invitations.

Trusted for more than 25 years

Fully regulated
we adhere to the strictest regulatory standards, and are fully licensed and regulated in 15 jurisdictions across europe, the middle east and asia.

Financial strength
we’re a financially stable company with a robust balance sheet. We serve clients in 170 countries, hold USD 16bn in AUM and process 1m transactions daily.

Multi-award winner
we’ve been consistently recognised by our industry and have won the highest accolades for our products, platform and service.

See all our products

Forex

Stocks

Commodities

Futures

Listed options

Bonds

Mutual funds

Ready to get started?

Opening an account takes around 5 minutes

Saxo markets
most of our staff in singapore are working from home to help limit the spread of the coronavirus. We remain at your service on the details below. Thank you for your understanding.

Products & pricing

Pricing overview

Forex

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Commodities

Forex options

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Etfs

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Regular savings plan

Platforms

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Across

Losses can exceed deposits on margin products. Please ensure you understand the risks.

Saxo capital markets pte ltd ('saxo markets') is a company authorised and regulated by the monetary authority of singapore (MAS) [co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of saxo bank A/S, headquartered in denmark. Please refer to our general business terms & risk warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as margin FX products may result in your losses exceeding your initial deposits. Saxo markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo markets does not take into account an individual’s needs, objectives or financial situation.

The saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.Home.Saxo/en-sg/about-us/awards.

This advertisement has not been reviewed by the monetary authority of singapore.

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FXCO academy

FXCO academy provides you the tools & resources necessary to achieve mastery in the forex markets utilizing the powerful jackpot strategy. Whether you aim to become an empowered and self sufficient trader, or you’re chasing pursuit of a passionate, purpose driven life, FXCO academy serves as an educational foundation to get you there.

We show you A-Z everything you need to become a successful career trader, from learning the basic fundamentals, to advanced multi-market analysis and jackpot strategy execution. Thousands, from all walks of life, have decided to take the leap – and they’ve never looked back. Are you ready to step into change?

BEGIN YOUR JOURNEY

FXCO academy

Mentorship

As a diamond or platinum level member of FXCO academy, you receive exclusive 1-on-1 mentorship from the founders themselves. You get hours of in-depth, hands on training where you will you learn & master the jackpot™ trading strategy, ask any question you need, and get valuable feedback in real time. Not only will you have this key advantage over other members, you will develop full confidence in your ability to trade without assistance, so you can start earning even sooner. Join FXCO academy as a diamond or platinum member today!

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Our mission

Is to provide you the tools necessary to achieve financial prosperity through high level education and personal engagement. We believe every individual has the power to tap into unrealized potential and become the best version of themselves. Your success is our #1 priority, now let’s work together and make it happen.

Bringing wall street to main street

Our mission

Is to provide you the tools necessary to achieve financial prosperity through high level education and personal engagement. We believe every individual has the power to tap into unrealized potential and become the best version of themselves. Your success is our #1 priority, now let’s work together and make it happen.

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The terms “you” and “your” refer to the person(s) or entity wishing to purchase the company materials (collectively hereinafter referred to as “materials”), as well as accessing or using our websites and providing us with your personal information. (collectively hereinafter referred to as “transaction”). “we”, “our”, and “us” refer to company and its employees, agents, members, owners, directors, officers, successors and assigns. By using our services and/or purchasing our materials, you agree to the terms and conditions set forth herein.

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By using the website or services, you represent and warrant that you are at least 18 years old, a resident of the united states, and are otherwise legally qualified to enter into and form contracts under applicable law. This agreement is void where prohibited.

Method of payment and refund policy:

The company offers its materials for a one-time payment. For these materials, a valid debit or credit card will be required to complete the purchase, and the amount of the purchase will be charged to the debit or credit card concurrently with the completion of the purchase on the website.

When you purchase an individual product, you will receive a streaming or digital version; no physical copies of products or other materials will be shipped or provided to you.

All payments made to the company in connection with the materials purchased are non-refundable; and the company does not offer, and is not required to provide, any refunds or credits for any reason, including, without limitation, satisfaction of the materials. There is no circumstance in which you will be entitled to, or the company is required to provide, a refund or credit for any reason, including, without limitation, satisfaction of the materials.

Trading forex carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade forex, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss in excess of any initial investment. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Any opinions, research, analyses, prices, or other information contained in the materials is provided as general market commentary and does not constitute investment advice and is subject to change at any time without notice. Any opinions, research, analyses, prices, or other information contained in the materials are for the sole purpose of assisting traders to make independent investment decisions. The company has taken reasonable measures to ensure the accuracy of the information on the website; however, it does not guarantee accuracy and will not accept liability for any loss or damage which may arise directly or indirectly from the content or from your inability to access the website, or for any delay in or failure of the transmission or the receipt of any instruction or notifications sent through this website. The company will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

This site is not intended for distribution or use by any person in any country where such distribution or use would be contrary to local law or regulation. None of the services or investments referred to in this website are available to persons residing in any country where the provision of such services or investments would be contrary to local law or regulation. It is the responsibility of visitors to this website to ascertain the terms of and comply with any local law or regulation to which they are subject.

The company may express or utilize testimonials or descriptions of past performance, but such items are not indicative of future results or performance, or any representation, warranty or guaranty that any result will be obtained by you. Your results may differ materially from those expressed or utilized by us due to a number of factors.

COMMODITY FUTURES TRADING COMMISSION RULE 4.41: hypothetical performance results have many inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those being shown.

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Links to third-party sites are provided for your convenience. Such sites are not within our control and may not follow the same privacy, security, or accessibility standards as ours. The company neither endorses nor guarantees offerings of the third-party providers, nor is the company responsible for the security, content or availability of third-party sites, their partners or advertisers.

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CME listed FX options: A capital-efficient, low-cost solution

Understanding & comparing CME FX options to OTC FX spot options

The launch of electronic trading in FX options at CME group fueled strong growth with daily turnover in excess of 90,000 contracts by 2017 – the equivalent of over $10 billion notional – with 98% traded electronically. In the process, the product was transformed to better align to OTC market conventions and provide more flexibility for all participants. CME listed FX options provide transparency, low cost trade executions and capital-efficient risk management capabilities that are quickly becoming critical in today’s increasingly regulated markets. According to ISDA, the final two phases of uncleared margin rules (“UMR”) will potentially impact more than a thousand market participants over the course of 2020 and 2021. UMR will require these OTC FX option market participants to post and segregate margin for non-cleared derivatives transactions at levels far exceeding the thresholds of listed centrally cleared trades and it is expected to create increased demand for viable alternatives such as CME listed FX options.

What CME FX options offer
CME FX options offer multiple features to market practitioners seeking a potential complement to their OTC FX options business:

More capital efficient
A recently released greenwich associates 1 report on UMR indicates that CME FX options will require significantly less margin and capital and could be as much as 86% more capital efficient than bilateral positions.

More cost effective
the greenwich associates study also highlighted an execution cost analysis (“ECA”) indicating that significant savings could be achieved from trading on the CME globex central limit order book (“CLOB”) – as much as 70% per trade in some cases – compared to bilateral OTC executions.

Stronger alternative
CME FX options are now a stronger, more efficient alternative for OTC FX options as they feature european-style exercise, alignment with the 10 a.M. New york cut, increased strike price granularity, multiple contract expirations out to one year (i.E., twelve weekly, eight monthly, and four quarterly expiries), and more efficient auto-exercise process.

Competitive screen liquidity
CME globex offers market participants deep, liquid, and transparent markets by option expiry and strike price that are highly competitive.

Bilateral trading capability
in addition to electronic execution on CME globex, participants can choose to trade blocks of CME listed FX options against preferred bilateral relationships to optimize their execution flexibility.

FX global code of conduct
CME FX options markets are regulated and governed by a rulebook which is aligned with the principles of the FX global code. CME FX options promote a robust, fair, liquid, open, and transparent market in which market participants can confidently and effectively transact at competitive prices that reflect available market information and in a manner that conforms to acceptable professional standards of industry behavior.

Operational efficiency
central clearing through CME group effectively removes the need for entering into complex ISDA® master agreements with multiple bilateral counterparties. A single clearing agreement provides access to the full liquidity available in CME FX futures and options.

CME group offers the largest, all-to-all electronic venue for trading FX options in the world with listed options on 24 currency pairs. In recent years, CME group has aligned its listed FX options offerings with over-the-counter market conventions to make them a more familiar and attractive alternative for OTC FX market practitioners seeking capital and cost-effective solutions.

New exercise-style
all CME FX options were converted from american- to european-style.

Efficient exercise process
options are auto-exercised against a fixing, providing a fully deterministic and highly efficient process.

Large selection of maturities
CME group now provides 12 monthly and 12 weekly option contracts – including the new monday options which launched on february 24, 2020 – for more precise hedging and trading opportunities.

More strike prices
CME group has increased the strike price granularity in short-dated FX options , introducing 25-pip increments for strikes near-the-money in short dated contracts.

New expiration time
the expiration time of CME FX options on major currencies has been changed to 10 a.M. New york time from 2 p.M. Chicago time to match the prevalent convention in OTC options. At CME group, one option contract is based on one underlying futures contract, therefore options have the same notion value as their underlying futures, and the price of the option is quoted in terms of US dollars per the base unit of the underlying notional. For example, the EUR/USD futures contract has a notional value of €125,000, so a price of $0.0125 for a EUR/USD option means a premium of $0.0125 125,000 = $1,562.50 per contract. In the major currencies, there are 24 option maturities to choose from at any given time: 4 new weekly mondays (launching february 24, 2020), 4 weekly wednesdays, 4 weekly fridays, and 12 monthly contracts (in CME parlance, the monthly contracts are split between 4 quarterlies and 8 serials). FX options are listed on a rolling basis so when one option expires the next nearest such maturity is listed. FX options exercise (deliver) into the nearest quarterly futures contract, with the quarterly option expiry being the last option contract month to deliver into it’s underlying future. CME FX options on a given currency pair share identical contract specifications regardless of option maturity. All weekly and monthly options contracts on a specific currency pair will have the same underlying contract unit, minimum price increment, trading hours, trading venues, settlement procedures, termination times on last trading day, position and reportable limits, minimum block thresholds, price limits, exercise style, and settlement methods.

With the new CME group expiration time now aligned with the 10 a.M. New york OTC convention, CME options on FX futures can be a near perfect substitute for an equivalent strike OTC option on FX spot. 2

Options on FX futures are theoretically very similar to OTC options on FX spot. The primary difference is that one underlying (futures) is more exposed to interest rate changes than the other (spot), so options on FX futures will have slightly more sensitivity to interest rates (i.E. Rho) than options on FX spot. However, CME FX futures are deliverable contracts, which promotes strong price correlation and ultimately price convergence between futures and spot. Consequently, the change in the value of options on FX futures will track the equivalent option on FX cash very closely.

An OTC FX option with the same maturity date as a CME FX option will have nearly identical greek values (apart from rho) if one adjusts the strike price to insure the comparison is between equal delta options. The example below highlights how to adjust the strike price on an OTC FX option to achieve near equivalence with a given standard strike CME FX option. The adjustment required is based on the swap points differential between the spot delivery and the futures delivery on the option targeted maturity date.

Example:
A CME FX option expiring on september 6, 2019 will deliver into a september 2019 FX futures contract that delivers on september 18, 2019, while the equivalent OTC FX option will deliver spot on september 10, 2019. Assume the swap differential between september 10 and september 18 is +25 pips (+0.0025). The OTC strike must be 25 pips lower than the CME strike to generate an equivalent delta value. If one compares an OTC 1.1275 strike call (put) option with a CME 1.1300 strike call (put), they will see nearly equivalent delta, vega, gamma, and theta values, while rho will be higher on the CME option.

Analysis of CME globex

CME globex is the premier electronic trading system for global connectivity to the broadest array of futures and options across all asset classes, providing users across the globe with virtually 24-hour access to CME markets. Approximately 98% of CME FX options are transacted electronically on CME globex. When compared to single- and multi-dealer electronic trading platforms, CME FX options on CME globex display robust market liquidity that is highly competitive with the bilateral OTC FX options market. Trading flow in CME FX options is consistent with global markets, peaking at the london market close/new york market open. Liquidity providers stream quotes 23 hours a day (one hour market close from 4 p.M. – 5 p.M. Chicago time), but participants can trade blocks during the CME globex close.

The full extent of liquidity in CME FX options is readily transparent on CME globex around the clock. For example, the average spread size for short-dated (90 days or less), at-the-money (“ATM”) FX options on the major currency pairs is approximately 2.5 ticks or less at the top of the CME globex central limit order book during regular trading hours (“RTH”). 3 for long-dated (91-150 days), ATM FX options on the major currency pairs, the average spread size is generally 3.0 ticks or less at the top of the CME globex CLOB during RTH.

Notionally, the average bid-ask size for short-dated, ATM FX options on the major currency pairs ranges up to $40 million at the top of the CME globex CLOB during RTH. For long-dated, ATM FX options on the major currency pairs, the average bid-ask size is approximately $15 million at the top of the CME globex CLOB during RTH.

Source: CME group. Average spread in ticks and size in contracts for the at-the-money strike price on the CME globex central limit order book, averaged across regular trading hours a single day in january 2019 to show the maturity liquidity profile.

Favorable TCA in CME FX options

Greenwich associates conducted a total cost analysis (“TCA”) of buy-side firms that compared the pricing of OTC FX options pricing with CME FX options and discovered that most market participants would see meaningful transaction cost savings by trading the first level of the CME globex central limit order book between 40-70% per trade, depending upon the option’s expiry date and strike price. 4 the study found that buy-side firms trading OTC generally had access to two-sided markets that averaged 2.6 pips for short-dated at-the-money strikes and 4.1 pips for long-dated ATM strikes. For short- and long-dated out of-the-money strikes, greenwich found two-sided markets of 2.8 and 4.2 pips wide.

Greenwich then compared these results against equivalent data from listed FX options on CME and found that participants could have saved between $2,000 and $7,000 per execution on trades of $50 million notional, and more significant savings on a percentage basis on smaller executions.

Since two-thirds of buy-side traders in the greenwich study reported average trade sizes of up to $50 million notionally, most market participants would see significant cost reductions by trading on CME globex. For larger transaction sizes, market participants should be able to maximize cost savings by working a series of smaller orders over relatively short time periods to take advantage of the liquidity resilience on the CME globex CLOB.

In its analysis, greenwich stated that “there is rapidly growing evidence that traders may be underestimating the liquidity available in listed options.” greenwich concluded by stating “we anticipate a meaningful increase in the number of traders who will turn to listed FX options as a viable alternative to some of their OTC activity.”

Anticipated impact of UMR

In the wake of the global financial crisis of 2007-2008, market regulators introduced uncleared margin rules (“UMR”) to reduce systemic risk in the financial system and to promote central clearing of the OTC derivatives markets. By september 2021, an estimated 1,000+ firms with $8 billion in average aggregate notional amount (“AANA”) 5 will qualify to post and collect initial margin (“IM”) and variation margin (“VM”) to segregated custodial accounts without rehypothecation for non-centrally cleared derivatives such as OTC FX options.

The impact of UMR on market participants during these final phases of IM implementation is expected to change the economics of trading OTC FX options since UMR will require these participants to post and segregate margin for non-cleared derivatives transactions at levels far exceeding the thresholds of centrally cleared trades.

In addition to higher margin for non-cleared derivatives transactions under UMR, a recent citi analysis on the funding cost of margining such transactions showed that fees of an FX prime broker (“FXPB”) would need to increase by a factor of 31 times just to break even on the funding costs associated with a competitive working capital rate of 50 basis points to offset the impact of UMR. 6

To validate this anticipated impact, CME group conducted its own margin analysis by comparing the IM requirement and

Resulting funding implications of a simulated FX option portfolio under three scenarios:

A dealer facing counterparties under a non-optimized bilateral standard initial margin model (“SIMM”) with no delta offsetting of cash-settled forwards.

A dealer facing counterparties via single prime broker (“PB”) with netted SIMM.

A dealer with an equivalent portfolio of CME listed FX options under CME SPAN. 7

The results:

The listed FX option portfolio generated 65% less margin requirement than the PB portfolio

And 89% less margin than the portfolio with bilateral SIMM.

These results confirm that market participants stand to benefit significantly from the powerful netting that occurs in listed FX options and from the advantageous 5-day margin period of risk (“MPOR”) used to calculate IM requirements based on a central counterparty (“CCP”) clearing model versus a 10-day MPOR used to calculate IM based on SIMM.

Furthermore, CME group’s analysis found the lower IM noted above combined with the advantageous capital treatment under the standard approach for counterparty credit risk (“SA-CCR”) made the listed FX options portfolio 55% more capital efficient than the portfolio with netted SIMM via PB and 86% more efficient than the portfolio with bilateral SIMM.

Use cases for CME FX options

With the increased product granularity and liquidity, market participants, including traditional OTC FX options traders, will find they can easily switch to CME FX options as a viable alternative to some of their OTC FX options activity for a variety of risk management and yield enhancement purposes.

Hedging a non-US dollar equity or fixed income portfolio
market participants can use CME FX options to hedge against exchange rate fluctuations in a non-US dollar equity or fixed income portfolio. For example, assume a US-based portfolio manager running a global allocation strategy takes a ¥10 billion position in japanese equities or government bonds. The manager is effectively long the japanese yen/US dollar exchange rate. The manager could purchase CME JPY/USD put options to hedge the portfolio’s currency risk. The hedge ratio would be determined by dividing the total yen exposure (¥10 billion) by the notional size of the contract (¥12.5 million) resulting in 800 contracts to be purchased for the correct hedge. Purchasing at-the-money JPY/USD put options provides the manager with more price protection but entails a much larger up-front investment. Comparatively, buying out-of-the-money JPY/USD put options provides the manager with less price protection but requires a much smaller up-front investment.

Yield enhancement
in addition to hedging the FX risk of a non-US dollar equity or fixed income portfolio, market participants can use CME FX options to enhance the returns of a foreign currency denominated portfolio as well. For example, assume a US-based portfolio manager has a €100 million position in german equities or government bonds. The manager is effectively exposed to price movements in the EUR/USD exchange rate. The manager can utilize CME EUR/USD options to enhance portfolio returns if the EUR/USD exchange rate remains stable for his investment horizon by selling EUR/USD call options. Selling ATM EUR/USD call options may provide the manager with more yield enhancement and greater degree of protection through the initial receipt of the option premium in the event of a market decline in the EUR/USD exchange rate. By comparison, selling OTM EUR/USD call options provides the manager with less opportunity for yield enhancement and protection in the event of a market decline in the EUR/USD exchange rate.

Market participants can also trade CME FX options in combination with the new CME FX link – the first ever electronic central limit order book for trading basis spreads between OTC FX spot and CME FX futures – to replicate cost-efficient, manageable synthetic exposure to OTC FX spot, forwards, and swaps.

For more information on FX link, how it works and how to get connected, visit cmegroup.Com/fxlink

Replacement of OTC FX delta hedge for CME FX option
market participants can use FX link to replace an OTC FX spot delta hedge of a CME FX option transaction for enhanced margin management. For example, a bank sells ATM put options on the CME JPY/USD futures contract. The bank seeks to delta hedge the short ATM put options against price movements in JPY versus USD to create a delta-neutral portfolio that will profit from the declining implied volatility and/or time decay of the short ATM put option position. The bank could execute a delta hedge by buying spot USD/JPY in the OTC market in an amount equal to the delta, or half of the underlying notional amount, of the short ATM JPY/USD put option position to create a delta-neutral portfolio. Alternatively, the bank could replace the OTC USD/JPY spot delta hedge of the short ATM put option position by buying the USD/JPY FX link spread – i.E., selling a delta-equivalent IMM-dated CME JPY/USD futures position while simultaneously selling an offsetting delta equivalent OTC USD/JPY spot position, effectively replacing the OTC USD/JPY spot position with a delta equivalent IMM-dated JPY/USD futures position.

Optimizing an CME FX option hedge
market participants can use FX link to make a CME FX option transaction more effective for hedged exposures requiring delivery of spot currency. For example, a fixed income portfolio manager has a euro-denominated bond maturing and wants to repatriate the proceeds of this asset for use in the US. The manager can purchase a bespoke dated EUR/USD put option from a bank for this purpose. If the put is in-the-money at expiry, the manager will exercise the option and use the spot transaction to sell EUR for USD for value on the bespoke date of the option. If the put is OTM at expiry, the manager will need to enter a second transaction to sell EUR versus USD on a spot basis. Alternatively, the manager could buy a CME EUR/USD put option. If the put is ITM at expiry, the listed EUR/USD put option is auto-exercised. The manager can then buy the EUR/USD basis on FX link to offset the short futures position originating from the put option’s exercise while achieving the desired spot settlement of selling EUR for USD. If the put expiries OTM, the manager simply executes a spot transaction instead, selling EUR for USD.

Conclusion
when UMR is fully implemented in 2021, traditional market practitioners in OTC FX options will find themselves increasingly motivated to trade CME FX options as a viable complement to their current OTC FX options trading activity. Traditional participants will benefit significantly as they migrate to CME FX options, which will require less margin and capital to trade than OTC FX options. Moreover, these same participants will capture material cost savings from trading anonymously on CME globex, and also have the ability to execute block trades by leveraging their current bilateral relationships during times when they may find it less conducive to trade options electronically.

Foreign exchange option (FX option)

The foreign exchange option was originally created as a way for companies and other entities to mitigate currency risks, but today it is very popular to use FX options for pure speculation as well, where both the issuer of the option and the buyer of the option are in it for speculative purposes only.

As the holder of an FX option you have a right, but not any obligation, to exchange a certain amount of a certain currency for another specified currency. The pre-established exchange rate is called strike price. Example: this FX option gives the holder the right to exchange 1 million USD for 8.5 million SEK on december 1st, 2016. The strike price for this option is 8.5

It is the issuer (creator) of an FX option that has the obligation to honor the option, should the holder of the option elect to exercise (use) it. So, why would anyone issue an option? When you have issued an option you sell it, and receive money right away. This money is known as the premium. Many FX options are never exercised, which means that the premium becomes pure profit for the issuer (minus transaction costs). Of course, issuing an option is risky because the holder may elect to exercise it and this can cost the issuer much more than the value of the premium.

When can I exercise my FX option?

The answer to this question depends on which type of FX option you have purchased. Most FX options fall into either of these two categories:

American-style FX optionthis FX option can be exercised by the holder on any day until the option has expired.

European-style FX optionthis FX option can only be exercised by the holder on the expiry date.

FX option that do not fall into any of these two categories are called exotic FX options. There is for instance the bermuda-style FX option, where the holder can elect to exercise it on certain pre-determined dates until it expires. There might for instance be one day each month during the lifespan of the option where it can be exercised.

Usually traded OTC

A majority of all issued FX options are traded over-the-counter (OTC).

As mentioned earlier, the FX option arose out of a need for companies and other entities to mitigate currency risk. By issuing FX option for OTC trade, the issuer can create highly tailor-made options since there are no standard requirements stipulated by an exchange to adhere to. A company that believes, but aren’t certain, that it will need a certain amount of a certain foreign currency at a certain time in the future can purchase a suitable FX option to handle this currency risk.

Example: A united states company expects that it will have a 1 million CAD bill to pay on may 30 next year. To mitigate currency risk, it purchases an FX option that will allow it to convert 700,000 USD into 1 million CAD on may 25. Buy doing so, the company knows for certain, that if that bill comes, it will cost exactly 700,000 USD to pay it. (if the company was 100% sure that the bill would come, it would probably use an FX forward instead of an FX option. You can read more about FX forwards below.)

There are a few exchanges that actually do have trade in FX options, and all the FX options traded on these exchanges are highly standardized. Trade in standardized FX options does for instance take place on the chicago mercantile exchange, the philadelphia stock exchange and the international securities exchange (in new york).

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Digital option

What is a digital option?

A digital option is a type of options contract that has a fixed payout if the underlying asset moves past the predetermined threshold or strike price. There's an upfront fee called the premium for digital options, which is the maximum loss for the option.

Unlike traditional options, digital options don't convert or exercise to the underlying asset's shares. Instead, they pay out a fixed reward if the asset's price is above or below the option's strike price. Digital options are also referred to as a "binary" or "all-or-nothing options."

Options explained

Options are financial derivatives, so they receive their value from an underlying asset or security. Traditional options give buyers the ability, though not the obligation, to transact in the underlying security at a predetermined price—called the strike price—by date of expiration—or the end date of the contract.

Options have a premium attached to them, meaning they have an upfront fee. The premium can fluctuate over time and vary from option-to-option based on the value of the underlying security, how close the option is to its expiration, the strike price, and the level of demand for the option in the market.

The value of the premium can also provide insight as to value investors place on the option and the underlying security. An option that has value will likely have a higher premium than an option that is unlikely to make a profit by its expiry date. Options are available for many securities including equities, currencies such as the euro, and commodities such as crude oil, corn, and natural gas.

Key takeaways

Digital options are a type of options contract that has a fixed payout if the underlying asset moves past the predetermined threshold or strike price.

The upfront fee called the premium is the maximum loss for digital options.

Unlike traditional options, digital options don't convert or exercise to the shares of the underlying asset.

Unique features of digital options

Digital options are different from traditional options in that they don't transfer ownership of shares when exercised or at their expiration date. Instead, digital options pay out the fixed amount to the investor if the price of the underlying security is above or below the strike of the option at expiry. The value of the payout is determined at the onset of the contract and doesn't depend on the magnitude by which the price of the underlying moves.

If the underlying asset expires in-the-money, meaning the option is profitable, the option is automatically paid out with the trader receiving the profit. If the option expires out-of-the-money meaning it's not profitable, the investor's maximum loss is limited to the upfront premium regardless of the underlying's price movements.

A digital option is merely a gamble or a bet that the price of the underlying asset will be above or below the strike price at a certain time and date. If an investor believes the price of the underlying will be above the strike, the option will be purchased. Conversely, if an investor believes the underlying's price will be below the strike, the option will be sold.

Listing and regulation of digital options

Unlike vanilla options, selling a digital option does not mean the trader is writing an option, which involves the seller or writer being paid a fee for allowing the buyer to exercise the option. In most cases, investors who sell traditional options use them as an income strategy and hope the option will not be exercised so they can keep the premium.

Selling a digital option is equivalent to buying a put option whereby the investor expects the underlying to be below the strike price at expiry. Some digital options brokers break up these options into calls and puts, whereas others have only one option where traders can buy or sell—depending on which direction they expect the price will go.

Call options are bought when the price of the underlying is expected to rise. Put options are bought when the underlying's price is expected to fall.

Digital options may appear to be similar to standard options contracts, but they may be traded on unregulated platforms. As a result, digital options can carry a higher risk of fraudulent activity. Investors who wish to trade digital options should use platforms that are regulated by the securities and exchange commission (SEC) and the commodity futures trading commission (CFTC).

Nadex is a regulated digital options broker in the U.S. The platform provides strike prices and expirations for various underlying assets. All options have a value of $100 or $0 at expiry. The maximum payout is $100, and the premium varies depending on the strike and the price of the underlying security. So, if a premium is $50, the maximum payout is also $50 because each contract's maximum value is $100. If the premium is $30, the maximum payout is $70 for that option.

Traders buy the option if they think the price of the underlying will be above the strike at expiration. If they think the underlying will be below the strike, they sell the option.

Digital options pay a fixed amount if the underlying asset moves past the predetermined threshold or strike price.

The maximum loss for digital options is limited to the upfront fee or premium.

Unlike traditional options, digital options don't convert or exercise to the underlying asset's shares.

Digital option's profits are limited to the fixed payout.

Digital options can be risky if traded on unregulated platforms.

Investors miss out on price gains after expiry since there's no ownership of the underlying security.

Real world example of a bullish digital option

Let's say the standard & poor's 500 index (S&P 500) is trading at 2,795 june 2. An investor believes the S&P 500 will trade above 2,800 before the end of the trading day june 4. The trader purchases 10 S&P 500 options at a strike price of 2,800 options for $40 per contract.

Scenario 1:

The S&P 500 closes above 2,800 at the end of the trading day, june 4. The investor is paid $100 per contract, which is a profit of $60 per contract or $600 (($100 - $40) x 10 contracts).

Scenario 2:

The S&P 500 closes below 2,800 june 4. The investor loses all of the premium amount or $400 ($40 x 10 contracts).

Real world example of a bearish digital option

Let's say gold is currently trading at $1,251, and an investor believes the price of gold will decline and close below $1,250 by the end of the day.

The investor sells a digital option for gold at a $1,250 strike price with expiry at the end of the day and will be paid $65 at expiry if correct. Since each of these digital options have a maximum value of $100, the premium paid in the event of a loss will be $35 or ($100 - $65).

Scenario 1:

Gold's price falls and is trading at $1,150 by the end of the day. The investor is paid $65 for the option.

Scenario 2:

The investor is wrong, and gold's price surges to $1,300 by the end of the day. The investor loses $35 or ($100 - $65 = $35).

It's important to note that nadex digital options allow traders to exit some positions before expiry for partial losses or partial profits depending on where the underlying is trading. However, there needs to be enough buyers and seller available. In other words, the liquidity—buying and selling interest—needs to be present to unwind an option position before expiry.

So, let's see, what was the most valuable thing of this article: trade forex options online with saxo. Access 44 FX vanilla options with maturities from one day to 12 months that allows you to trade across devices. At capital fx option