Options
IG Markets offers options on a wide range of markets, giving you the opportunity to take a view on the volatility of a particular market.
What is an option?
An option is a leveraged financial instrument that derives its price from another underlying financial market. IG Markets offers two types of options: Call options and Put options.
A Call is the right to buy an underlying instrument (for example the FTSE®) at a certain price, known as the strike. For example, if you believe there will be a big move up on the FTSE® 100 before the end of the day (away from its current level of 5300), you can decide to buy £10 per point of a daily FTSE® 5300 call which has a price of 11-14.
What does this mean?
You now hold the right, but not the obligation, to buy £10 per point of the FTSE® at a price of 5300 rather than the level of the official settlement. For this right you have paid 14 (the offer part of the 11-14 price), which means the worst-case scenario is that you can lose £140 (14 x £10 per point) should the option finish worthless. The option only finishes worthless if the FTSE® finishes the day below 5300.
Potential profit and breaking even
For every point the FTSE® settles above 5314 you make £10 per point. To break even you need the FTSE® to reach 5314, calculated as 5300 (strike) + 14 (price paid for option).
When buying options (be it 'calls' or 'puts') your risk is known and strictly limited, but your profits are theoretically limitless.
A put is very similar to a call except it is a right to sell an underlying instrument at a certain price.
As in the example above, you might think the FTSE® will have a large move, but this time you think it will be a move down. Therefore you buy £10 per point of a 5300 put, currently priced at 13-16, buying yourself the right to sell at a fixed price.
Again, you can calculate your break even point as 5300 (strike) - 16 (price) = 5284. You will therefore make £10 for every point that the FTSE® falls below 5284. However, you will lose £160 (16 x £10 pounds per point) if the option finishes worthless, which would occur if the FTSE® closes above 5300.
A Straddle is an options strategy involving the purchase of both a call and a put at a particular strike at the same time. You would want such a position if you believed there was going to be a significant move, but you were not certain of the direction.
Daily and longer-term options
We offer daily options for day-traders and anyone who is interested in short term trading, as well as longer-term options for a wider view on the markets.
What are daily options?
At IG Markets, daily options are options, as described above, that expire at the close of the underlying market on the trading day of the trade in question. So if you trade a Daily FTSE® option at 11:30 in the morning it will close at the official settlement of the FTSE® that afternoon. We offer an unrivalled 24-hour service on FTSE® 100, Wall Street, Dax, EUR/USD, GBP/USD, and many more.
Why daily options?
Daily options allow you to take a short term view on the volatility of the underlying market, in addition to the directional movement. If you think the underlying market is going to have a big move on a particular day you can potentially benefit irrespective of whether the market moves higher or lower.
Longer-term options
With IG Markets, longer-term options allow you to take a long-term view on the volatility of the underlying market, in addition to the directional movement. We have a wide range of long-term options and offer an unrivalled 24-hour service on FTSE® 100, Wall Street, Dax, EUR/USD, GBP/USD, and many more.
To see a full list of long term options that we offer you can view options contract details. If there are any options you cannot see online that you may like to deal please contact the options desk on +44 (0)20 7896 0051.
Types of options
We offer options on various markets, including stock indices, forex and shares.
Stock index options
We offer a full range of traded options based on leading stock indices, including daily options and Futures on the FTSE® and Wall Street, with no commission to pay.
Forex options
Ideal for the short-term trader, our daily options are available on some of the most popular forex pairs.
Each trading day we offer a full range of Call and Put options on USD/JPY, EUR/USD, GBP/USD, USD/CHF and EUR/GBP. Options expire at 2pm Chicago time based on the spot rate.
As with our standard forex contracts, the quote is 'all-in', so there is no commission to worry about.
Share options
We offer Share options on a wide range of shares. Our share options are a special form of CFD, which give you exposure to changes in option prices but cannot be exercised by or against you, and thus cannot result in delivery of actual shares.
As long as there is a tradable option in the underlying market, we trade all options on shares in the FTSE® 100, the DOW 30, the S&P 500, the Nasdaq 100 and some large cap Canadian and Australian stocks, as well as on a large selection of European options traded on Eurex or Euronext.
We charge a standard commission per lot, per side, on USD, EUR, CHF, GBP, CAD and AUD shares. There is no commission charge on expiry of a share option, but the standard commission will be charged for opening and closing positions. The charge is automatically applied to your account.
It is important to note that our share options are off-exchange contracts that cannot be exercised. You can, of course, close a position in a share option on our quotation at any time before expiry; positions not closed in this way are automatically cash-settled on expiry.
Whereas most other options can be traded either telephonically or online, individual share options can only be traded over the phone.
