Common Questions on Trading HSI Options
Q1. What is the contracted value of an HSI Option?
The value of an HSI Option contract is equal to the option premium multiplied by the dollar value per index point (i.e. the contract multiplier). The contract multiplier of HSI Options is HK$50 per index point (it is HK$10 for Mini-HSI Options).
Q2. Where can I find a qualified broker to trade HSI Options?
You may find a list of qualified Hong Kong Futures Exchange Participants at the HKEx website (List of Futures Exchange Participants).
Q3. What fees should I have to pay if I trade HSI Options (Mini-HSI Options)?
The transaction costs include:
1. Broker's commission - Negotiable
2. Exchange Fee - HK$10.0 (HK$2.0)
3. SFC Levy - HK$ 1.0 (HK$0.2)
4. Investor Compensation Levy (Note) - HK$ 0.5 (HK$0.1)
Note: The Investor Compensation Levy is not chargeable on or after 19 December 2005 until further notice as announced by the Securities and Futures Commission.
(Transaction costs for Mini-HSI Options are in brackets.)
Q4. Is there any fee incurred if I hold my option position until expiry for settlement?
If you hold your HSI Option contract to expiry, you have to pay an exercise fee of HK$10 for exercising your in-the-money option as all the in-the-money options will be automatically exercised at expiry. However, if your option is at-the-money or out-of-the-money at expiry, no exercise fee will be charged.
Q5. When should I have to pay margin?
If you buy options and pay the premium in full, you do not need to pay margin. However, if you write options, you have to pay a margin deposit to your broker before you place the orders and will be subject to margin calls if the deposit in your margin account falls below a maintenance level.
Q6. Can I get any margin offset if I hold both long and short positions in HSI Options?
Yes. The margin calculation system (SPAN) will take into account all the HSI Option positions including both long and short positions you hold.
Q7. What will happen to my option if I do nothing?
If you are an option buyer, you will (1) lose all the option premium if your option does not have any intrinsic value at expiry; (2) get the intrinsic value if your option is in-the-money at expiry, as all the in-the-money options upon expiration will be automatically exercised. If you are an option seller, you will (1) earn all the option premium if the option is not exercised at expiry; (2) incur a loss if the option you sell becomes in-the-money.
Q8. Do I need to hold my option until expiry?
No. Either the buyer or seller of an option can close out his position at any time before the expiry of the option through an offsetting or closing transaction. For example, a buyer of a call option can offset his position by selling an identical call option.
Q9 Would I lose my profits if I forgot to close out or exercise my in-the-money option position at expiry?
Not necessarily. Open options contracts that are in-the-money upon expiration will be automatically exercised.
Q10. Will there be someone for me to trade options with?
Apart from other investors, you may trade options with the market makers. There is a market-making system in the HSI Options market. If you cannot find any counterpart to trade option with, you may request through your broker for the market makers to provide quotes.
Q11. Is it possible for me to place my order directly with HKEx?
No. All orders must be placed through your broker who must be a qualified HKFE Participant.
Q12. Where can I obtain market information on HSI Options?
You may obtain HSI Options market information from the following sources:
1. A list of information vendors that provide quotes for HSI Options and their access codes for HSI Options can be obtained from the HKEx website (List of information vendors);
2. HSI Options market data can be obtained from the HKEx website
(Derivatives Market); and
3. Information from the HSI Options market is available in many financial newspapers. |