Margin utilization around expiry
When approaching the expiry of a Contract Option that has a stock as of the underlying, and the option is In-The-Money (ITM) or reasonably close to being ITM, our risk system will start to calculate the cost of acquiring the underlying stocks, and reserve cash accordingly.
More specifically, 2 hours before expiry, our risk system starts reserving more and more cash, minute-for-minute. This is to ensure you have the cash required to acquire the underlying stocks at the strike price at the time of expiry. Please note that this cash reserved is in addition to and on top of the margin required for maintaining all margin positions.
The cash the risk system reserves will be shown as Initial Margin Requirement and Maintenance Margin Requirement - hence you might experience a spike in your Margin Utilization around expiry. Should there be insufficient margin collateral funds on your account, it is prioritized to only close out the stock options that expire on the same date but depending on the circumstances, this could lead to other margin positions also being closed out as well.
At expiry - meaning
- If the Contract Option is In-The-Money AND you have sufficient cash to buy the underlying stock, you will be assigned the Contract Option to buy at the strike price.
- If the Contract Option is In-The-Money AND you do NOT have sufficient Cash to buy the underlying stock, Saxo will close out your Contract Options position before expiry.
More details
You can get more details on the impact of expiring options on your margin utilization using the Expiring Options Closeout Monitor report:
- Go to the main menu
> Account activity & reports > Expiring options closeout monitor report (Data will be available 4 hours before the option's expiration).
- A clickable badge
will also be shown next to the margin utilisation from 4 hours before the upcoming option expiry. Clicking on it will take you to the report.
The report provides a comprehensive overview of the current margin utilization as well as the estimated utilization factoring the option’s expiry. It also gives a breakdown by Expiry and Underlying:
- Estimated OEM: The estimated option expiry margin requirement for all options that could be in-the-money.
- Weight: The weight linearly increases during the closeout risk period (last 2 hours before the expiry time)until it reaches 100%.
- Current OEM = The reserved option expiry margin within the closeout period i.e. Estimated OEM x Weight.