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Options vs ‘funds available’


lamkjo

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For those ‘in the know’ or with more experience of Options trading out there...

If you buy a Call option (let’s say GBP/USD)  and the price drops vs what you paid for it... so you’re ‘out of the money’. You’re account shows the theoretical amount you are down. 

... in reality you wouldn’t exercise the option as it would be cheaper to buy on the market. However because the account reflects the ‘loss as per the market’ rather than just the commission... the ‘funds available’ on your account are being affected and thus funds that should be for use are being tied up. In reality the real loss is the commission paid for the contract (the call option is the right not obligation to buy the asset... so GBP/USD).

Is this really how it works, what everyone else is also experiencing or am i missing something here?

Thanks.

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A bought option (call or put) can only go down to zero (never negative)

If you have 1000 free margin and buy a call for 100 you have 900 free margin left until you sell or the option expire 

If you sell the option (before it expire) at 200 you have 1200 and if you sell for 50 you have 950

When the option expire (you should look it up in info) two things can happen, either it expire worthless at zero or with some kind of value that IG credits the account

 

Best thing to do is using demo to learn  how it works before risking any money

 

 

 

 

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50 minutes ago, Kodiak said:

Still waiting for someone with experience to start a thread on optionstrading 😉

Could be interesting and educationally

Remember a oilguy? in ythe past that did some trades but he? stopped for some reason?

And i think Caseynotes did som trades also? 

 

Ah yes, our friend who got himself banned, his long only options strategy looked to be working well until the indices stopped trending and started this long consolidation phase at the start of 2018 and it all went pear shaped.

I toyed with them for a couple of months on demo but for my own trading I was not convinced there was any advantage over SB's. 

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