Forex Options

Diversify your investments with FX Options trading

FX Vanilla Options trading with FAB Investing is a golden opportunity for investors to diversify their trading strategies by using various investment timelines as well as hedging spot positions.

You enjoy access to more than Spot FX crosses and can trade on changes in market direction as well as markets without clear direction.

Trade over-the-counter (OTC) on 43 FX Options including Gold and Silver Enjoy low margin requirements with professional netting calculations for hedging

spot positions. View your net positions and get live prices on Maturities, Deltas and Strikes directly

on your trading platform via our cutting-edge FX Options Board. Utilise flexible Currency Option expirations, from 1 day to 1 year.

FOREX OPTIONS

Trade FX Options on live prices with available liquidity of a Market Maker.

FX Vanilla Options

A Vanilla Option is a derivative financial instrument that gives the buyer the right, but not the obligation, to either buy or sell Call or Put Options of a predefined notional amount of a currency cross at a pre-defined price ("Strike price") at a predefined date in the future (“Expiry date”). The seller of the option has a corresponding obligation to fulfil the transaction should the buyer decide to “exercise” his right.

Trade FX Options long or short

At FAB Investing, Forex Options can be either bought or sold.

FX Options can be traded from the FX Options Board

The FX Options Board covers maturities from 1 day to 6 months in standard tenors and strikes. Other maturities and strikes are available in a separate trade ticket or as Request For Quote (RFQ).

Innovative FX Options Board

'Click and Trade' solution built into FAB Investing’ trading platforms. An intuitive and customized workspace displaying both FX Vanilla Options in

dedicated views. A matrix of quotes across wide range of standardised maturity dates and strikes. An overview of net open positions.

Allows you to continuously monitor prices on multiple contracts.

Exercise Method

Choice of settlement

At FAB Investing, we support New York cut FX Options which expire at 10:00 New York time. Any FX Options that are "in the money" at this time are exercised automatically and converted into spot positions for trading convenience.

Alternatively you may choose to exit the position via the cash exercise method. In this way your position is exited at the mid-price of the current spread – even in volatile markets.

Data Tools

Guided by data

To enhance the FX Options trader’s understanding and ability to profit from FX as an asset class, FAB Investing provides direct access to over-the-counter (OTC) FX Options interbank market-specific information and data on our clients’ positions.

Make your strategy come to life

FAB Investing’s FX Options Board puts everything you need right before you, with standard maturity dates and strike prices that make it easier to see the most liquid Forex Options.

Simply scroll up and down the strikes and across the maturities to select the Forex Option you wish to trade. Find your next trading strategy effortlessly either horizontally, vertically or diagonally. Other strikes and maturities remain available to you with streaming liquidity through the Forex Options trade ticket on the platform.

Forex Options prices are consistently delivered in an intelligent and dynamic way.

Explore the many new features with the magnifier icons below.

Comprehensive Reports

Five ways to analyze your combined Options and Spot portfolio

FAB Investing has built a professional-grade set of reports that offer invaluable information if you are taking a portfolio-based approach to trading a combination of FX related products.

These reports allow astute investors to manage their risk exposure and reflect their market view efficiently in their trading.

Detailed analysis at your fingertips

Forget about messy spread sheets. Put away your pocket calculator. Now you can simply log into your platform and access professional-grade risk matrixes in the FX Options Report, giving you a detailed analysis of your FX and FX Options positions. You’ll be able to quickly gauge your exposure to various factors under a range of scenarios, enabling you to control risk and more accurately reflect your market view in your trading.

Summary Per Cross aggregates all positions per currency pair, and shows a global view of the risk in each pair

Net delta by Currency shows the delta triangulation risks to identify the cross a portfolio is most exposed to

Summary per Position displays a table showing the market sensitivities per individual position to identify the root of specific exposure

Spot ladder clarifies the sensitivity of the portfolio Spot/Volatility Grid gives a two dimensional view of portfolio sensitivity Get this free

as a FAB Investing client.

Discover our FX Options Report here.

Trading Window

Superior trading experience on FAB Trader

Trading via the award-winning FAB Trader FX Options trade module is the answer to every demanding investor’s need. Packed with standard plus additional fields, the module allows traders to decide on their desired trade, place their order directly on the dynamic order module and see their decision reflected instantly in real time on the Account module.

Margin Requirements

How FAB Investing determines margin for FX Options

DELTA MARGIN + VEGA MARGIN

Delta Margin

The Delta of a Forex Option position describes how the value of the Forex Option changes as a result of changes in the underlying Forex spot rate. The Delta Margin requirement is calculated as follows:

DELTA MARGIN = DELTA EXPOSURE X FOREX SPOT MARGIN REQUIREMENT

When calculating the Delta Margin requirement, all of the portfolio's current spot exposures – both open FX spot positions and FX Vanilla Option spot exposures – are considered.

Vega Margin

The Vega of an FX Vanilla Option position describes how the value of the Forex Option position changes as a result of changes in the implied volatility of the underlying Forex cross. The Vega Margin is calculated as follows:

VEGA MARGIN = NOTIONAL AMOUNT X VEGA X MAX (IMPLIED VOLATILITY, 20%) * VOLATILITY FACTOR

Volatility Factors are set per Currency Pair and Expiry Date tenor (see table below). Between these Expiry Date tenors the Volatility Factors are interpolated. The Volatility Factors for short dated Expiry Dates are higher than those for long dated Expiry Dates because the volatility of a long-term Forex Option position is relatively less dynamic than a short-term Forex Option position.

When calculating the Vega Margin requirement for a Forex Option position, netting is performed across each Currency Pair for each Expiry Date. Thus, if you have bought and sold Forex Options in the same Currency Pair and for the same Expiry Date, the Vega Margin is calculated as the net of these positions.

The Volatility Factors used in the Vega Margin calculation for major and minor currency pairs are shown below in tabular and graphical form. As noted above, Volatility Factors are interpolated between the expiry date tenors.

Tenor Days Major Currency Pairs Minor currency Pairs

Short Long Short Long

Positons Positions Positions Positions

1 week 7 28% -28% 50% -50%

2 weeks 14 20% -20% 25% -25%

1 month 30 11% -11% 20% -20%

3 months 90 8% -8% 15% -15%

1 year 365 8% -8% 10% -10%

Listed below are instruments available on the FabTrader platform.

Major Currencies

AUD JPY

CAD NOK

CHF NZD

EUR SEK

GBP USD

Minor Currencies

SGD ILS

CKZ MXN

HUF TRY

PLN XAU

ZAR XAG

Trading Conditions

FX Vanilla Options Trading Conditions

Award winning pricing

FAB Investing provides you with an access to available liquidity and live streaming prices. FAB Investing prices are shown on your trading platforms as dynamic Bid/Ask spreads. The options’ bid/ask spreads are of variable nature and depend on the contracts’ maturity and an underlying currency pair.

Choice of Exercise method

Forex Vanilla Options that are 'in the money' are automatically exercised at 10:00 am EST (New York cut) on the day of expiry. By default they are converted to a spot position.

Up until one hour before exercise you may choose between receiving the spot position ('spot') or having FAB Investing automatically exit the spot position at mid-price of the spread at the time of exercise ('cash'). There is no limit to the number of times you may change the exercise method. The 'cash' exercise method is available on both long and short positions and will always happen at mid-spread - even in volatile market conditions. If 'spot' exercise method is chosen, the spot position is subject to the usual profit/loss if the spot price moves from the exercise price. If you already have an offsetting position at the time of exercise, the exercised position will be netted out on the following day.

Auto execution

The majority of orders on FX Vanilla Options are handled automatically. That is, all orders below an auto execution limit, which varies by instrument, delta and maturity, are accepted without manual intervention by the dealing desk.

The auto execution limits are displayed in the trading platforms under Forex Options Trading Conditions.

Note that auto execution limits may be changed without prior notice under volatile or illiquid markets.

Trade on quotes FREE, with No Slippage*

'Green' option prices streamed up to the auto execution limits will be executed automatically, whereas the ‘yellow’ prices that are above the auto execution limit trades require you to request for a quote (RFQ), which means that the dealer will quote prices to you manually. So that the options’ execution price available is the actual price of the trade known to you upfront – “what you see is what you get”, with no slippage involved.

FAB Investing does not charge you for requesting a quote from a dealer.

* In normal market conditions.

Expiration Style

FAB Investing offers European style FX Vanilla Options, that is, option will be exercised or expire only at the expiry date and cut at 10:00 Eastern Standard Time (New York cut). Positions cannot be exercised prior to maturity.

Since FAB Investing always quotes both bid/offer prices, you are always able to close your position before maturity at the current market price. The long and short positions will then be netted off prior to expiry.

Minimum Trade Size

The minimum trade size for FX Vanilla Options on currency pairs is 10,000 units of base currency; for precious metals are 10 oz (Gold) and 100 oz (Silver).

Prices

FX Vanilla Options Prices

Pricing model

The pricing model FAB Investing uses for FX Vanilla Options is the Black-Scholes model.

Spreads are variable depending on maturity and currency pair. Prices are shown as dynamic bid/ask spreads.

Please refer to the platform or call your FAB representatives for the most up-to-date information.

Pricing for your account type

FAB Investing FX Vanilla Options spreads vary by the account type and by the currency pair.

The pricing displayed on your trading platforms is characterised by the account type that has been configured for you when opening the account.

Spreads

The quoted FX Options spreads are for 30 day at-the-money options. Spreads for other strikes and maturities will vary.

FAB Investing reserves the right to apply different spreads for notional amounts exceeding market standard or for customers requiring a specific level of service.

Ticket fee on small trades

Small trade sizes incur a 'Minimum Ticket fee' of USD10 or equivalent in another currency. A small trade that attracts a Minimum Ticket fee is any trade below the 'Ticket Fee Threshold' listed below.

FX Vanilla Option Ticket Fee Threshold

XAUUSD 50XAGUSD 5,000AUDSGD, EURCZK, EURHUF, EURPLN, EURTRY, EURUSD, GBPAUD, GBPCAD, GBPCHF, GBPJPY, GBPUSD, USDCAD, USDCHF, USDHUF, USDILS, USDJPY, USDMXN, USDPLN, USDSGD, USDTRY, USDZAR

50,000

AUDJPY, AUDNZD, AUDUSD, CADJPY, CHFJPY, EURAUD, EURCAD, EURCHF, EURGBP, EURJPY, EURNOK, EURNZD, EURSEK, NZDJPY, NZDUSD, USDNOK, USDSEK

100,000

NOKSEK 1,000,000

Margin Requirements

FX Vanilla Options Margin

Margin Profile

The margin calculation for FX Vanilla option at FAB Investing take into account changes in:

Volatility Spot price of the underlying asset Existing open positions

Delta and Vega Margin

The margin requirements for FX Vanilla option positions at FAB Investing consist of two components:

Delta Margin - related to the exposure to changes in the underlying Forex spot rate Vega Margin - related to changes to the exposure in the volatility of the underlying

Forex cross.

The margin requirement of a FX Vanilla options position is:

Margin Required = Delta Margin + Vega Margin

Delta Margin

The Delta of an FX option position describes how the value of the option changes as a result of changes in the underlying FX spot rate.

The Delta of an FX option position multiplied by the notional amount gives the underlying spot exposure of the position (i.e., Delta Exposure = Notional Amount * Delta). The spot exposure represents the size of the spot position required to hedge the FX option. The calculation for the Delta Margin requirement of a Forex Option position is:

Delta Margin = Delta Exposure * Forex Spot Margin Requirement

When calculating the Delta Margin requirement for a new FX option position, all of the portfolio’s current spot exposures at the client's account with FAB Investing including any subaccounts - both open FX spot positions and FX option spot exposures – are considered.

Vega Margin

The Vega of an FX Vanilla option position describes how the value of the FX option position changes as a result of changes in the implied volatility of the underlying FX cross.

The calculation for the Vega Margin component of a Forex Option position is:

Vega Margin = Notional Amount * Vega * Max (Implied Volatility, Floor Value) * Volatility Factor

A floor value of 20% apply.

Read more about the Volatility Factor below.

Volatility Factor

Volatility Factors are set per Currency Pair and Expiry Date tenor (see table below). Between these Expiry Date tenors the Volatility Factors are interpolated (see graph below). The Volatility Factors for short dated Expiry Dates are higher than those for long dated Expiry Dates because the volatility of a long-term Forex Option position is relatively less dynamic than a short-term Forex Option position. When calculating the Vega Margin requirement for a Forex Option position, netting is performed across each Currency Pair for each Expiry Date. Thus, if a client has both bought and sold Forex Options in the same Currency Pair and for the same Expiry Date, the Vega Margin is calculated as the net of these positions. See the sample calculation for an example of this. The Volatility Factors used in the Vega Margin calculation for major and minor currency pairs are shown below in tabular and graphical form. As noted above, Volatility Factors are interpolated between the expiry date tenors.

Tenor Days Major Currency Pairs Minor currency Pairs

Short Positons

Long Positions

Short Positions

Long Positions

1 week 7 28% -28% 50% -50%2 weeks 14 20% -20% 25% -25%1 month 30 11% -11% 20% -20%3 months 90 8% -8% 15% -15%

1 year 365 8% -8% 10% -10%

The next table shows the categorisation of currencies for Major Currency Pairs. With respect to these Volatility Factors, a Major Currency Pair is one which includes BOTH of any of the currencies listed.

Major Currencies AUD JPYCAD NOKCHF NZDEUR SEKGBP USD

Exceptions for bought Options

There is no margin required to hold long FX Vanilla Option positions if:

You hold no sold options, and You hold no FX spot or forward positions in the same cross.

If you only hold bought FX Vanilla Options, then no margin is required to hold the FX Vanilla Option positions. However, cash is required to pay the Premiums for the bought Forex Options. If you choose to trade in margin instruments (Spot forwards, or options) in addition to bought options, that would change the delta exposure in your existing portfolio. Hence, the Delta and Vega margin methodology applies to the entire portfolio in the given currency cross(es). This would include an option being exercised into a Spot trade at expiry. Squared positions for FX Vanilla or Forex spot are not taken into consideration.

Risk Warning

You should be aware that in purchasing Foreign Exchange Options, your potential loss will be the amount of the premium paid for the option, plus any fees or transaction charges that are applicable, should the option not achieve its strike price on the expiry date.

Certain options markets operate on a margined basis, under which buyers do not pay the full premium on their option at the time they purchase it. In this situation you may subsequently be called upon to pay margin on the option up to the level of your premium. If you fail to do so as required, your position may be closed or liquidated.

If you write an option, the risk involved is considerably higher than buying an option. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received.

By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you, however far the market price has moved away from the strike price. If you already own the underlying asset that you have contracted to sell, your risk will be limited.

If you do not own the underlying asset the risk can be unlimited. Only experienced traders should contemplate writing uncovered options, even then only after securing full details of the applicable conditions and potential risk exposure.

Trading risks are magnified by leverage – losses can exceed your deposits. Trade only after you have acknowledged and accepted the risks. You should carefully consider whether trading in leveraged products is appropriate for you based on your financial circumstances. Please consider our Risk Warning and General Business Terms before trading with us.

Margin Call

Margin requirements can be changed without prior notice. FAB Investing reserves the right to increase margin requirements for large positions sizes, including client portfolios considered to be of very high risk.

It is your responsibility to ensure that the required margin collateral, as listed in the Account Summary on the trading platforms, is maintained at all times.

If the funds in your account fall below this margin, you will be subject to a margin call where you must either:

Reduce the size of the open margin positions and/or Provide more funds (margin collateral) to the trading account.

When the required margin exceeds your margin collateral, you are at risk of a stop-out. In such a circumstance, FAB Investing is entitled to close ALL your margin positions on your behalf.