Option trading is highly speculative and is not suitable for all investors due to the risks involved. Buyers and sellers of Contract options should familiarize themselves with the type of option (i.e. put or call, bought or sold) they intend to trade and the associated risks. Contract options are traded with Saxo Capital Markets as counterparty to the trades.
A Contract option gives you the right or the obligation to either buy or sell a specified amount or value of a particular underlying asset at a fixed exercise price, by the option being exercised either before or on its specified expiration date. A Contract option which gives you the right to buy or the obligation to sell is a call option and a Contract option that gives you the right to sell or the obligation to buy is a put option.
A Contract option that is in the money on expiry will always be exercised.
Trading Contract options involves a high level of risk. Contract options that gives you the right to either sell or buy an underlying asset (bought Contract options) might expire worthless and your initial investment ( i.e. premium and transaction costs) will be lost. Contract options that gives you the obligation to either sell or buy an underlying asset (sold Contract options) can result in substantial (potentially unlimited) losses. To assure you will be able to cover losses on sold Contract options Saxo Capital Markets will require margin charges. Nonetheless, potential losses can exceed the margin charged and you will be liable for these losses.
If your total exposure on margin trades exceeds your deposit, you risk losing more than your deposit. If the underlying asset of a Contract option is a margin traded product (i.e. a derivative), and if the Contract option is being exercised by the buyer, then the buyer (in case of a call option) or the seller (in case of a put option) of the Contract option will acquire a position in the underlying margin traded product with associated risks as well as liabilities to provide margin.
Please note that by default, you will be enabled for buy Contract options (puts and calls) only. Should you wish to be enabled to write / sell Contract options (puts and calls), please contact your account manager.