Pros and cons of trading daily options
Pick your own leverage
Choose your strike and trade size to determine your leverage and match your risk appetite, bearing in mind profit/loss will still be calculated based on your full position size.
Trade daily options with new reduced spreads as low as one point – the same as regular spot markets.
Limited risk on buying options
Buying options is inherently limited-risk – you’ll only risk as much as the margin you pay when buying an option.
Substantial risk on selling options
With selling call or put options, your risk of loss is potentially unlimited.
Hold your bought position even when markets move against you. Until expiry there is always potential for a worthless bought option to become profitable.
Unparalleled market range
IG offers daily options on more markets than any other provider.
You can trade daily options around the clock on our most popular markets.1
No spread at expiry
Unlike other providers, we won’t charge you any closing spread to close an option if you hold it to expiry.
What are daily options?
Options are contracts that let you trade on the price movement of an underlying asset With IG, you can spread bet or trade CFDs on an option’s price. You’ll never risk more than your initial payment when buying, just like trading an actual option, but your positions will always be cash-settled at expiry. You’ll never have to deliver, or take delivery of, the underlying.
You can use daily options to take a view on whether you think a market will be above or below a certain level – the strike price – at the option’s expiry. For daily options, this is at market close on the same day that you open your trade.
The cost to open a position is based on the strike price and trade size you choose. This means the amount you pay to open your position can be significantly less than when spread betting or trading CFDs on spot markets.
Types of daily option
There are two types of daily option – calls and puts.
- If you think the market is going to rise, you’d buy a call
- If you think the market is going to fall, you’d buy a put
Find out more about types of options and how to trade them here.
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How much does an option cost?
Our daily option prices are set by our dealing desk, based on the following three factors: the time to expiry, the current level of the underlying market and the volatility of the market.
The more likely it is that the underlying market will be above a call option’s strike price at expiry, the higher the option’s margin will be.
Likewise, the more likely it is that the underlying marketing will be below a put option’s strike price at expiry, the higher the margin will be.
The margin is calculated as trade size x daily option price.
How does selling options differ to buying them?
Selling options carries a much higher risk profile than buying them.
When you sell an option, you have the obligation to buy or sell at the strike price, and there’s no predicting how far past the strike the underlying may be at expiry. This means that when you sell call options the risk is potentially unlimited.
Learn more about the risks involved in options trading.
How do I trade options via spread betting or CFDs?
Trading options via CFDs or spread betting is similar to trading them on the open market. For instance, you can buy the right to trade ten FTSE 100 CFDs at 7100, or to spread bet £10 per point on the FTSE 100 at the same level. You’ll pay a margin at the outset, where on a traditional option you’d pay a premium, but it functions in the same way – when buying, you won’t risk more than your initial payment. All spread bets and CFDs on our options are cash-settled on closing – you’ll never have to deliver, or take delivery of, the underlying.
Learn more about trading options.
What’s the difference between margin and premium?
When you trade on margin, spread betting or trading CFDs on a spot market, you get greater exposure to a market than the amount you deposit to open the trade. However, as well as the potential for magnified gains, you could also experience magnified losses exceeding your initial deposit.
When you buy IG options you still pay a margin to open your position, but it works like he premium of a traditional option. You’ll get greater exposure to a market than the amount you originally deposited to open the trade., but your risk is limited to that initial payment.
When selling traditional options, you receive the premium upfront. When you sell IG spread bet or CFD options, you’ll pay a margin upfront – your maximum profit if your trade works out. However, you’ll be left open to potentially unlimited losses if the market doesn’t go your way.
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1 For forex based on number of primary relationships with FX traders (Investment Trends UK Leveraged Trading Report released June 2020).
2 The views of each member are not fixed and are likely to vary over time as a result of changes in the economy and the government’s inflation rate targets. This table illustrates where FOMC members are thought to stand at the time writing (18 December 2017).