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FX Options Trading Conditions

Choice of Exercise method

Forex Vanilla Options that are 'in the money' are automatically exercised at 10:00 am EST (New York cut) on the day of expiry. By default they are converted to a spot position.

Up until one hour before exercise you may choose between receiving the spot position ('spot') or having automatically exit the spot position at mid-price of the spread at the time of exercise ('cash'). There is not limit to the number of times you may change the exercise method.

The 'cash' exercise method is available on both long and short positions and will always happen at mid-spread - even in volatile market conditions.

If 'spot' exercise method is chosen, the spot position is subject to the usual profit/loss if the spot price moves from the exercise price. If you already have an offsetting position at the time of exercise, the exercised position will be netted out on the following day.

Auto Execution

The majority of orders on FX Vanilla Options are handled automatically. That is, all orders below an auto execution limit, which varies by instrument, delta and maturity, are accepted without manual intervention by the dealing desk.

The auto execution limits are displayed in the trading platforms under Forex Options Trading Conditions.

Note that auto execution limits may be changed without prior notice under volatile or iliquid markets.

Trades on qoutes

'Green' option prices streamed up to the auto execution limits will be executed automatically, whereas the ‘yellow’ prices that are above the auto execution limit trades require you to request for a quote (RFQ), which means that the dealer will quote price to you manually. So that the options’ execution price available to you is the actual price of the trade known to you upfront – “what you see is what you get”.

DNB Bank does not charge you for requesting a qoute from a dealer.

Expiration Style

DNB offers European style FX Vanilla Options, that is, option will be exercised or expire only at the expiry date and cut at 10:00 Eastern Standard Time (New York cut). Positions cannot be exercised prior to maturity.

Since DNB always quotes both bid/offer prices, you are always able to close your position before maturity at the current market price. The long and short positions will then be netted out prior to expiry.

Risk Warning for FX Options

You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date.

Certain options markets operate on a margined basis, under which buyers do not pay the full premium on their option at the time they purchase it. In this situation you may subsequently be called upon to pay margin on the option up to the level of your premium. If you fail to do so as required, your position may be closed or liquidated.

If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received.

By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you. It does not matter how far the market price has moved away from the strike. If you already own the underlying asset that you have contracted to sell, your risk will be limited.

If you do not own the underlying asset in this case FX spot position (this is known as uncovered option or naked option position) the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, then only after securing full detailed of the applicable conditions and potential risk exposure.

Risk warning

FX Options is a margin product. Margin trading allows investors to buy and sell assets that have a greater value than the capital in their account. Margin Trading carries a high level of risk to your capital with a possibility to lose more than your initial investment.
Please read complete information on financial products and risk associated on this page.