Stock Option
Basic Information
Each option contract is defined by relevant information
- Related assets: The relevant assets of an option can be stocks, indices, commodities, etc
- Strike price: The buyer will trade with the option writer (Seller) on the relevant assets at this price if the buyer decided to exercise the option
- Contract Size: Each option contract can be exercised for the number of board lots on the related assets (Shares)
- Expiry Date: Time remaining until expiration on option contract
- Premium: The amount paid for the option (Buyer) or the amount received from the option (Option writer)
The List of Stock Option Classes Available for Trading (HKEx)
Option Strategies
- Long Call：Paid premium to buy option, forecast relevant assets soaring (Bullish Market)
Long Call - Long Put：Paid premium to buy option, forecast relevant assets slumping (Bearish Market)
Long Put - Short Call：Received premium as a fixed return. Bearish and, entering high position adjustment
Short Call - Short Put：Received premium as a fixed return. Bullish and , entering low position adjustment
Short Put
The maximum loss is the premium who invested to buy Long in the option
The risk is relatively large who sold a short in the option. An option writer (Seller) received the premium. The premium received may not be sufficient to offset the loss caused by the ups and downs.
**Index options are cash-settled, and each month’s settlement is determined to win or lose. Stock options are physical settlement (Shares).
*** The explanation of options in Chinese Version, as opposed to the English translation, shall be deemed to be conclusive and definitive.
【Example】Call Options Trading & Exercising
【Example】Put Options Trading & Exercising
Summary
| Strategy name | Breakeven price | Profit | Loss |
| Long Call | Strike Price + Premium on option | Potential Unlimited | Limited |
| Short Call | Strike Price + Premium on option | Limited | Potential Unlimited |
| Long put | Strike Price – Premium on option | Potential Substantial | Limited |
| Short Put | Strike Price – Premium on option | Limited | Potential Substantial |
Securities Options Trading Fee
| Trading Fee(HKEx) | Tier 1 Stock Options ─ HKD$3.00 |
| Tier 2 Stock Options ─ HKD$1.00 | |
| Tier 3 Stock Options ─ HKD$0.50 | |
| Exercise Fee (HKEx) | HKD$2.00 |
| Brokerage | Negotiable |
Margin Requirement
Clients can receive a premium when they short call or put. When doing so, they must deposit enough money to fulfill the margin requirement.
There are different margin requirements for option contracts with different strike price and expiry date. The margin requirement can be found out from the HKEx web site Client Margin Estimate Reference Table. In case of conflict between the HKEx web site and the option statement, option statements shall prevail.
When there is an intra-day margin call, it is necessary for clients to deposit sufficient money into their options account within the time specified.
For Short positions, kindly remind about the contracts’ notional value (Stock value of short positions if contracts is being assigned). Additional margin requirements may require for large short position, clients may need to prepare additional cash as margin requirements for risk control. For details, please contact us.
Exercise and Assign
If clients would like to exercise their stock options, then please contact Stock Options Department at (852) 2844 9806 before 4:30 pm.
If contracts are exercised / assigned from selling stocks which clients do not own, clients are required to buyback the stock by T+1.