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Can FX options trigger margin calls?


Packman11

Question

Is there any scenario where you can get margin called on FX options? I bought as much as I had cash for, so my margin is below my funds.

I assumed this margin cannot change, but then heard I of someone who got margin called on FX options, he claims IG increased the margin some time after he bought them, which wiped him out.

I question anything I read on the internet, but is there any scenario where the margin on FX options could increase?

For example can the value of FX options go negative, or can a change in spread increase the margin value after you've bought them.

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if you have bought a call or a put you have effectively paid up front....however if you have sold a call or put , the maintenance margin can change either with volatility or if the market moves against you

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16 hours ago, gezmond said:

if you have bought a call or a put you have effectively paid up front....however if you have sold a call or put , the maintenance margin can change either with volatility or if the market moves against you

Hi, thanks for the reply.

However I realized there's another situation: if your account is say priced in Euro, and your options are priced in Dollar, then if the Dollar increases in value, your margin (which is in Euro) actually goes up.

For example if you have a 100 euro in your account and buy 100 euro worth of options priced in Dollars, then you'll need say $110 margin if the exchange rate is 1.1 at the time, but priced in Euro, that's 100 euro margin.

However, if later on the Dollar climbs to 1.05 then you now need 105 euro to maintain your margin.

I'm glad I found out before it affected me, I read of someone who lost all his money through this effect. I'd suggest IG to advertise this more clearly.

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if you have bought options , makes no difference ....unless you didnt have the cash in your acct when you initiated the trade and are trading on margin, sorry if I misunderstood, I assumed you meant buying the options with cash in your account

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yes I'm talking about buying options with cash. for CFD accounts this is still done on margin, but the margin is limited to your funds

however if you max out your funds to buy the options, under the assumption that the margin on options can't change, and then the exchange rate moves against you, then this can trigger a margin call

and because options can drop a lot in value fast after buying them, a forced sale of them can cause huge losses

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