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Contract Options at Binckbank N.V. Contents CONTRACT OPTIONS AT BINCKBANK N.V. CONTENTS Product Features 3 1. Tradable instruments 3 2. Trading platforms 3 3. Orders supported 3 4. Exercise & Settlement 3 5. Expiry 3 6. Client margin profiles 4 7. Options Strategies 4 Contract Options Trading Conditions 5 Trading Options at BinckBank 8 1. Why trade Contract Options? 8 2. Unique Selling Points of Contract Options at BinckBank 8 Appendices 9 Appendix 1: Tradable instruments at launch 9 Appendix 2: Order ticket screenshots 11 Appendix 3: Margin Requirements 12 Appendix 4: Margin Reduction Schemes 15 Appendix 5: Option Introduction 16 Appendix 6: Option Basis 19 Appendix 7: Index Options Beginners Tutorial 28 Appendix 8: Options Glossary 30 2 BinckBank is a tradename of Binckbank N.V. - Licensee Dutch National Bank - Registered at the Authority of Financial Markets (A.F.M.) - Chamber of Commerce Amsterdam 33162223 PRODUCT FEATURES 1. Tradable instruments 2. Trading platforms All Contract Option instruments are listed on Contract Options will be tradable from an industry- an exchange and there is no market-making or standard options chain in the Binck Self Investing matching of client trades and orders. The full list of and the WebTrader. There will be no options chain instruments and exchanges on which they trade can in the MobileTrader but you will be able to close be seen in the table in appendix 1, but below there positions from MobileTrader. See the screenshots in is a summary of the key contracts available and their appendix 2 of the options chain and order ticket. product groups. 3. Orders supported Limit and Market orders will be supported. Good- Product Groups Key Contracts Till-Canceled (GTC) parameters are available. Agriculture Cocoa, Coffee, Corn, Soybean, Wheat, Sugar, Cattle, Hogs, … 4. Exercise & Settlement Energy Crude Oil, Natural Gas, Ethanol, BinckBank will be offering two types of option as ... defined by the exchange where a Contract Option Equity Index DAX, EUROSTOXX, FTSE, is listed. American style options can be exercised CAC, SMI, AEX, … S&P 500, at any time before the expiry, while European style NASDAQ-100, Dow Jones, … options can only be exercised at expiry. CBOE SPX, OEX, NDX, VIX, … ASX, HSI,NIKKEI, … Options can be exercised online from the trading FX EUR/USD, GBP/USD, Other platforms or are auto-exercised at expiry. In-the- Majors and Emerging Money (ITM), Contract Options on Futures (American Interest Rates STIRs (EuroDollar, EuriBor, style) are settled into a new Futures position, EuroYen, Sterling, …) European-style Contract Options on Stock Indices Treasuries, Gilt, Bund, Bobl & (ITM) are cash settled into the trading balance at Schatz, … expiry. Metals Gold, Silver, Copper, … 5. Expiry These instruments are listed on the following All positions are subject to an Auto-Exercise exchanges: procedure at expiry: • ASX • All long positions on In-the-Money options are • CBOE assumed to be exercised. • CBOT • All short positions on In-the-Money options are • CME assumed to be assigned. • COMEX • All positions on Out-of-the-Money options are • EUREX abandoned. • EURONEXT – Ams • EURONEXT – Liffe A Call Option is In-the-Money when the strike price • EURONEXT – Par is below the market price of the underlying asset. • HKEx A Put Option is In-the-Money when the strike price • SGX is above the market price of the underlying asset • TSE Abandonment of In-the-Money positions is not supported. BinckBank is a tradename of Binckbank N.V. - Licensee Dutch National Bank - Registered at the Authority of Financial Markets (A.F.M.) - Chamber of Commerce Amsterdam 33162223 3 Thus, clients should close their option positions prior to expiry. 6. Client margin profiles BinckBank will operate with two margin profiles: • A basic profile by default which enables clients to buy options only – puts and/or calls. • An advanced profile for individually assessed clients which enables the client to do the same as the basic profile and to write (sell/short) options and receive margin benefits on option strategies (combinations of options and/or underlying positions). For more information about Margin requirement and Margin reduction schemes please refer to Appendix 3 & 4. In case of a margin breach and stop-out is triggered, all option positions will be closed. 7. Options Strategies There will not, in this launch, be any automated execution of the separate legs of trading strategies. Clients wishing to trade strategies will need to execute the legs themselves or contact CTS to do so. For more details on options strategies, please refer to appendices 3, 4 & 5. 4 BinckBank is a tradename of Binckbank N.V. - Licensee Dutch National Bank - Registered at the Authority of Financial Markets (A.F.M.) - Chamber of Commerce Amsterdam 33162223 CONTRACT OPTIONS TRADING CONDITIONS Contract Options Early Exercise of Options These Contract options are available for online Holders of a long position in American Style options trading through the BinckBank platform. can exercise the option any time prior to expiry, except on the last trading day. To exercise a long Short trades on Contract Options option position, an exercise request can be entered By default,you will not be enabled to trade Contract in the trading application; in the “Account Summary”. Options short. Short selling of Contract Options is allowed for individually assessed clients who have When the exercise request is entered, the option obtained an advanced margin profile. Please contact position is closed at price 0 and a position in the your account manager for more information. underlying instrument is created at the strike price. This happens instantly. Partial Fills Partial fills may occur on Limit orders and the Clients should always consider closing the option remaining amount stays in the market as a limit position in the market and acquiring the underlying order and may be filled within the order duration. instrument separately. Often the market value of the Market orders can be filled at numerous levels; the option exceeds the unrealized profit from opening price paid will be the volume weighted average price the underlying position at the strike price. of all the fills. Currency options on CME are not allowed to be Exercise and Settlement exercised out of the money, hence these requests BinckBank offers two types of Contract Options as will be cancelled once encountered. defined by the exchange: • American style Options can be exercised online Exercise Cut-off at any time before the expiry apart from the last Exercise requests need to be entered before the trading day. exercise cut-off time as specified by BinckBank; see • European style Options can only be auto- these in Contract Options Settlement Conditions. exercised at expiry. The Exercise cut-off time facing BinckBank clients is prior to the cut-off times as defined by the exchange When in-the-money, an American style Contract in order to give BinckBank and its brokers the time Options position can be exercised into a specific to forward the request to the exchanges. If exercise Futures contract position, which is visible on the requests are entered after the cut off time clients Account Summary until expiration. Once the will be rejected and the client must wait until the Contract Option expires, the position stays visible next day to exercise before the cut off time. on the Account Summary until the settlement day (instrument-specific). A European style Option, when Last Trading day in-the-money, is only exercised at expiry and is cash On the last trading day, clients will not be able to settled. exercise any position, since the expiry auto-exercise process will manage exercising against the exercise settlement value. BinckBank is a tradename of Binckbank N.V. - Licensee Dutch National Bank - Registered at the Authority of Financial Markets (A.F.M.) - Chamber of Commerce Amsterdam 33162223 5 Expiry and Auto Exercise Deactivation of the underlying asset When trading Contract Options at BinckBank, all If the Exchange deactivates the underlying asset, Options positions are subject to an auto exercise BinckBank will notify its clients and remove the procedure at expiry: related positions from the clients trading accounts. • All long positions on in-the-money Options are assumed to be exercised Italian Financial Transaction Tax • All short positions on in-the-money Options are for derivatives assumed to be assigned The tax will be applied to all Italian Derivatives • All positions on out-of-the-money Options are whose underlying assets are equity instruments abandoned issued by Italian companies. The Italian FTT for Derivatives applies irrespective of the location of A Call Option is in-the-money when the strike price the client or the jurisdiction of the transaction, so is below the market price of the underlying asset. everyone trading Italian Derivatives will have to pay A Put Option is in-the-money when the strike price new Italian FTT for Buys and Sells. is above the market price of the underlying asset. Abandonment of in-the-money positions is not Contract Options on Italian Indices supported. Thus, clients should close their Option positions prior to expiry. Notional 0- 2.5- 5- 10k- 50- 100- 500- Over Value 2.5k 5k 10k 50k 100k 500k 1,000k 1,000k (EUR) Some exchanges can have different thresholds to determine if an option is OTM or ITM. Typical Tax (EUR) 0.25 0.5 1 5 10 50 100 200 convention is just one tick ITM, though e.g. for Hong Kong stock options, an option is only being exercised/assigned if it is at least 1.5% ITM. Closure of positions in case of excess of Otherwise the options are considered being OTM. Margin Utilization on your account BinckBank is a Dutch bank licensed by the Dutch Full premium vs.
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