Features of an Options Contract
Once you understand how you can make money with options and can identify the risks involved, you may be interested at the details that make up your options contract. Unlike warrants, the ASX regulates exchange-traded options so that each contract is standardised to a degree.
Certain terms and conditions can change, and you should always check with the ASX or your chosen options broker before making any financial commitments. However, to discover the basic features to a standard exchange-traded options contract, check out the information below:
- Contract Size - Unless an adjustment has been made, one options contract usually covers 1000 underlying securities.
- Available Securities - The available securities for exchange traded options is quite large, and a full list is available from the ASX.
- Expiry Dates - Options expire on set days determined by the Australian Clearing House (ACH). Stock options have a range of different expiry months and contracts cycle over 9-12 months. Stock options usually expire on the last business Thursday of the month, and index options expire on the third Thursday of the month.
- Exercise Or Strike Prices - This price dictates the amount you plan to buy or sell stock using an options contract. Usually, there is a price around the current market value as well as prices above and below market value. The issued strike prices will change over time as the underlying asset fluctuates in value.
- Initial Margins - Market forces determine the premium you pay for an options contract. These are usually quoted in cents per share, and you can obtain the full premium price by dividing this number by 1000. Index options are quoted in points, and at the time of writing, one point is equal to $10 premium cost.
- Margin Payments - If you have written an options contract, you will have to pay margins daily as prices fluctuate. The ACH calculates these margins through a process known as the Theoretical Intermarket Margining System (TIMS), and this is done to protect the financial security of the market.
Features of an Options Contract
Once you understand how you can make money with options and can identify the risks involved, you may be interested at the details that make up your options contract. Unlike warrants, the ASX regulates exchange-traded options so that each contract is standardised to a degree.
Certain terms and conditions can change, and you should always check with the ASX or your chosen options broker before making any financial commitments. However, to discover the basic features to a standard exchange-traded options contract, check out the information below:
- Contract Size - Unless an adjustment has been made, one options contract usually covers 1000 underlying securities.
- Available Securities - The available securities for exchange traded options is quite large, and a full list is available from the ASX.
- Expiry Dates - Options expire on set days determined by the Australian Clearing House (ACH). Stock options have a range of different expiry months and contracts cycle over 9-12 months. Stock options usually expire on the last business Thursday of the month, and index options expire on the third Thursday of the month.
- Exercise Or Strike Prices - This price dictates the amount you plan to buy or sell stock using an options contract. Usually, there is a price around the current market value as well as prices above and below market value. The issued strike prices will change over time as the underlying asset fluctuates in value.
- Initial Margins - Market forces determine the premium you pay for an options contract. These are usually quoted in cents per share, and you can obtain the full premium price by dividing this number by 1000. Index options are quoted in points, and at the time of writing, one point is equal to $10 premium cost.
- Margin Payments - If you have written an options contract, you will have to pay margins daily as prices fluctuate. The ACH calculates these margins through a process known as the Theoretical Intermarket Margining System (TIMS), and this is done to protect the financial security of the market.