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Everything you need to know about options Discover our options page to learn all you need to know about options. You can also learn more about options with Saxo's free options courses. You can trade stock options with all our SaxoTrader and SaxoInvestor platforms. |
- New to options
- After mastering the basics
- Troubleshooting
What is an option?
An option is a financial derivative that represents a contract between two parties, giving the holder the right, but not the obligation, to buy (call) or sell (put) an underlying asset at a predetermined price (strike price) within a specified period. The underlying asset can be a stock, commodity, currency, index, or other financial instruments.
- A stock option is a contract that gives the holder the right, but not the obligation, to buy or sell a specific number of shares of a particular stock.
- FX options, or foreign exchange options, are derivatives that give the holder the right, but not the obligation, to exchange a specified amount of one currency for another.
- A listed option is a type of option that is traded on a formal exchange, such as the London Stock Exchange. These options are standardized in terms of contract size, expiration date, and strike price, which makes them highly liquid and accessible to investors.
- Contract options refers to the broader concept of the option agreement itself, which can include both listed and OTC options.
Why should I trade options?
Investors trade options for several reasons. These include:
- Leverage: Options allow you to control a larger position with a relatively small amount of capital.
- Risk management: Options can be used to hedge against potential losses in your portfolio.
- Speculation: Options allow speculation on market movements with minimal capital investment.
- Market access: Options can provide access to various markets, including stocks, indices, commodities, and currencies.
Read more about the advantages of options on our options page.
What options does Saxo offer?
Saxo offers a wide range of listed options you can trade on SaxoTrader and SaxoTrader for desktop. You can discover all available options by using the Instrument search bar.
What is an option strategy?
An option strategy is a method of trading options by combining different instruments to achieve financial goals, such as hedging against losses, generating income, or speculating on future price movements. Some common options strategies include:
- Covered call: Selling call options on an asset you already own to earn from the option premiums.
- Protective put: Buying put options to safeguard against potential declines in the value of an asset you own.
- Straddle: Purchasing both a call and a put option with the same strike price and expiration date, anticipating significant price movement in either direction.
- Strangle: Buying a call and a put option with different strike prices, expecting large price movements.
Learn more about the options 'strategies' ticket or option strategies on our options page
What options tools does Saxo offer?
Saxo offers a wide range of options tool that can help you in various areas such as analysis, risk management, and executing buy and sell orders.
Discover Saxo's comprehensive suite of options trading tools
What is an option chain and how can I view it?
An option chain is a listing of all available options contracts for a particular underlying asset. It provides detailed information about each option, including the strike prices, expiration dates, and premiums (prices) for both call and put options.
Learn more: Using the option chain
What entails rolling an option?
Rolling an option involves closing an existing position and opening a new one with a different expiration date or strike price to extend duration, adjust strategy, or manage risk.
Read more: How to roll a stock option
What is the option strategies ticket?
- The option strategies ticket allows traders to simultaneously buy and/or sell different options from the same ticket.
- The FX option strategies ticket allows you to trade simultaneously up to 10 FX vanilla options from the same ticket. All option legs are executed in one go.
Read more: The listed options 'Strategies' ticket and The FX option 'Strategies' ticket
What are option greeks (delta, gamma, theta, vega) and the options risk ladder?
Option Greeks are measures that help traders understand how different factors impact an option's price. They assess sensitivity to changes in the underlying asset's price, time until expiration, market volatility, and interest rates, aiding in risk management and strategic decision-making.
- The definitions of the greeks are slightly different for equities and FX. Find an explanation of both here: The 'Options risk ladder'
Why can't I trade options?
There are several reasons why you might be unable to trade options:
- Make sure you have taken the appropriateness test: If you wish to trade complex products like options, you must complete the appropriateness test.
- Options with a underlying rating 6 instrument: Options where the underlying instrument has a rating of 6, can only be sold as part of a covered call, where you have sufficient stocks to cover.
- Margin requirements: When trading with leverage, make sure you meet the initial and maintenance margin requirements.
Why can't I short (sell) an option?
There might be several reasons why you can't sell options.
- Have you enabled shorting of listed options? Learn how to do so: How can I enable writing (shorting) of listed options - stock and contract options?
- Make sure you have taken the appropriateness test: If you wish to trade complex products like options, you must complete the appropriateness test.
- Options with a underlying rating 6 instrument: Options where the underlying instrument has a rating of 6, can only be sold as part of a covered call, where you have sufficient stocks to cover.
- Margin requirements: When trading with leverage, make sure you meet the initial and maintenance margin requirements.
Read more: Why am I unable to place an options trade?
Why can't I trade options on SaxoInvestor?
Options and other complex products can only be traded on SaxoTrader and SaxoTrader for desktop. You can log in on all three platforms with the same login.