Basic question about options trading

[CD_]

Hi,

I'm using a demo CFD account and bought a call option on GBP/USD for 56.5. It was my understanding that this is equivalent to the option premium and that, as a buyer, my losses would be limited to this amount. However, I've seen the loss on this trade exceed 56.5 a number of times.

I am clearly misunderstanding something. Is it that CFDs don't replicate this aspect of option contracts?

Thanks very much in advance.

[CD_]

Anyone? Please let me know if my question is unclear.

Thanks

[gezmond]

Hi ,

I have been spreadbetting options on indices and commodities (rather than cfd and fx,but i think the same reasoning applies) 

I think what may be happening is that until the trade is over, you haven’t actually “paid” for the trade , so you are  just using some margin to keep the trade open. When you reach expiry you shouldn’t lose more than the premium....can you post a screenshot?

 

[CD_]

Hi,

Thanks for the response. Attached is a pic. As can be seen, this call is my only open position currently.

 

[gezmond]

i’m assuming that £408 is just your “running loss” ie  if you closed the trade now you would lose £408 ....aren’t cfds 10 contracts ? (so to me it looks like you paid 56.5 x 10 =£ 565) and if you close / sell your call now you get £157 back (565-408) if you click the drop down arrow at the top of screen next to the £5,379 it will have some more info...hope that helps...

[Kodiak]

Yes looks like 1 contract = 10 usd? (on CFD demo)

If you can (depends on location) i suggest you add a options/Barrier account using MYIG

Live looks like this

Still waiting for the vanilla options on stocks to show up🤔

Edited March 6, 2021 by Kodiak

[CD_]

Thanks very much guys. You've cleared that up for me.