Options Margin Policy
Smart Currency Options Ltd
This is the policy applied by SMART Currency Options Limited. (SCOL) for the purpose of setting and managing Margins in relation to Options contracts with each client who has an agreement in place under which a Trading Facility has been set up for that client to trade currency options contracts with SCOL (“Agreement”). This Margin Policy forms part of your Agreement and will apply to that Agreement and each Options Contract arranged under that Agreement.
For the purpose of this Policy the definitions set out in your Agreement shall apply unless otherwise stated.
Although all SCOL offers each currency Options Trading Facility so that it may be used by you as part of your FX risk management and currency hedging strategy, the market value of any particular Options Contract between you and SCOL can fluctuate significantly between the trade date and the expiry date
The purpose of this Margin Policy is to protect SCOL from any risk exposure owing to the fluctuation in the market value of a currency Option Contract and/or from any liabilities that you may have towards SCOL as a result of entering into such a Contract or otherwise under their Agreement.
Please ensure that you read this Margin Policy carefully and agree to it as part of your Agreement with SCOL before being provided with a Trading Facility and before entering into any transaction with SCOL.
Means the advance payment of such amount as SCOL may determine at its absolute discretion. This is to provide SCOL with security in respect of the risk SCOL is incurring on your Contract prior to you making full payment;
The Margin may be made up of a combination of elements which are as follows:-
a) Initial Margin – means in relation to any Contract the amount that you are required to pay to SCOL as a pre-condition to SCOL’s acceptance of your Order for a particular Contact and is payable in immediately accessible funds in the amount and at or before the time and date stated by SCOL when advising you of that requirement.
b) Additional Margin / Margin Call –means in relation to any Contract each and any payment other that SCOL notifies you that you are required to pay to SCOL at any time following Contract Date which is in addition to any Initial Margin and the amount will be determined by SCOL in its absolute discretion in light of SCOL’s opinion from time to time of the amount required to provide SCOL with security in relation to changes in the market value of the Contract and your liabilities in relation to the Contract.
The time and date by which You are required to pay any Additional Margin/ Margin Call to SCOL are set out in Your Agreement.
SCOL’s policy for the assessment and setting of the Margin for each Contract is based on their evaluation of risk which could materialize by your failure to fulfil your obligations either on the said contract or on some/all of your outstanding contracts with SCOL.
This evaluation of risk is based on a number of factors of which some are listed below:-
- Number and types of outstanding Option contracts you hold at the point in time
- Notional amount of all outstanding Option contracts you hold at the point in time
- Number and type of new Option contracts you are seeking to enter into with SCOL
- Notional amount of new Option contracts you are seeking to enter into with SCOL
- Delta of the Option contract
- Spot margin for the currency pair underlying the Option contract. The Spot margin for various currency pairs relates to the degree of volatility in the exchange rates and is updated from time to time. The current Spot margins are given below.
- Factors to either scale the margin amount up or down based on our judgement of the perceived risk in a transaction.
- Other variables as determined by SCOL from time to time
On expiry, exercise or sale back on an Option, SCOL will take into account the total margin they hold against that contract while determining the final settlement amount.
Spot Margins for underlying currency pairs
|Currency Pair||Margin Requirements|
Revisions to this Margin Policy:
If this Margin Policy is revised SCOL will in accordance with the Agreement post a revised version on its website and the version posted at the date of any Contract which you enter with SCOL shall apply to that Contract. The date of issue of the current version will appear at the end of the document in each case.
Last updated: October 2018