Options Examples

Demo account Lost details?

Options Examples

Home >
Range of Markets >
Options >
Options Examples

IG Markets makes it simple for you to take advantage of volatility in markets by trading Options.

Buying a FTSE Call Option

It's January and you believe the FTSE 100 will rise. Our quote for FTSE 100 February Forward stands at 5412/5414 and our quote for a February FTSE 100 5500 call option is 81/84. You decide to buy this option CFD for £10 a point at 84.

One advantage of buying options is that you know your maximum possible loss in advance. In this case, you cannot lose more than 84 x £10 a point = £840

A few days later, as you predicted, our price for FTSE 100 February Forward has risen to 5532/5534 and, based on this, the February FTSE 100 5500 call option price we are quoting is 145/148. You decide to take your profit by closing your position at 145.

Profit

Closing level	145
Opening level	84
Difference	61

Profit: 61 x £10 = £610

Buying a Wall St Put Option

In January our Wall St March Forward quote is 10484/10490. You think Wall St is set to fall so decide to buy our March 10400 Wall St put option. Our price for this option CFD stands at 270/284 and you buy $10 a point at 284.

One advantage of buying options is that you know your maximum possible loss in advance. In this case, you cannot lose more than 284 x 10 = $2840.

A few days later, against your expectations, Wall St rises and our price for Wall St March Forward is 10603/10609. Our price for our March 10400 Wall St put option is now 210/224. You don’t think Wall St will recover before March, so decide to cut your losses and close your position.

Loss

Closing level	210
Opening level	284
Difference	74

Loss: 74 x $10 = $740

*Largest single provider of CFD accounts in the UK, Investment Trends 2009 UK Spread Betting and CFD Report.

The information on this site is not directed at residents of the United States or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

Member of the London Stock Exchange. Authorised and regulated by the Financial Services Authority. FSA Register number 195355.

Apple, the Apple logo, iPod, iPod touch, and iTunes are trademarks of Apple Inc., registered in the U.S. and other countries. iPhone is a trademark of Apple Inc.
App Store is a service mark of Apple Inc.

Options Examples