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IG options


endodontist

Question

I want to ensure that I totally understand the CFD / Spread bet way of options rather than the traditional way.

What I want to know is that if you are trading NDX daily and you pay for a call option strike price of  16270 which commands a premium of 137. 

If NDX gets to 16420, then you can exercise you right, so the profit would be 16420-16270 = 150.  If you have 1 contract this would be 100 "shares" = 15000, and then subtract your premium =14863 USD profit.

Why does this not show up on the account, I tried this in a demo and the figures are much less. 

Questions

1) Options pricing is more complex than the example I have given, there are the Greeks which come into play. Why does IG not show how things are calculated

2) Only after you have bought / sold the option, does the option chart come up. Why cant you see this before? Again why is there no calculation to show you how the figures are derived

3) Taking the other side of the bet, selling PUTS that are far out of the money, why does it show as a negative as soon as you sell it. If it OTM you collect the premium and hope it expires worthless. eg on the demo account I sold a 16242 PUT daily NDX exp today. The current price is 16400. Well out of the money, why does it show as a negative balance.

Also again the chart has values on the Y axis that range from 0 to 30. Why am I not seeing this on the options chain ladder? How are these figures derived and calculated.

Thank you

 

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52 minutes ago, endodontist said:

What I want to know is that if you are trading NDX daily and you pay for a call option strike price of  16270 which commands a premium of 137. 

If NDX gets to 16420, then you can exercise you right, so the profit would be 16420-16270 = 150.  If you have 1 contract this would be 100 "shares" = 15000, and then subtract your premium =14863 USD profit.

This is how it works with spreadbetting:

Your "break even" price is 16270 + 137 = 16407

If NDX gets to 16420 then you have made 16420-16407  = 13 points profit.

If you bet say 10 GBP per point then your profit would be 13 x 10 = 130 GBP

58 minutes ago, endodontist said:

Taking the other side of the bet, selling PUTS that are far out of the money, why does it show as a negative as soon as you sell it. If it OTM you collect the premium and hope it expires worthless. eg on the demo account I sold a 16242 PUT daily NDX exp today. The current price is 16400. Well out of the money, why does it show as a negative balance.

Because there is a bid/offer spread. As soon as you open the trade your PL is negative because if you want to reverse the trade it would cost you the spread.

Spread bet options do not work like regular options, you are betting on the price of the option rather than buy/selling an actual option.

I hope this helps!

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