Options trading is a high-risk type of trading. Before trading, please read Option Risk Disclosure.

1. About Options

Options refer to a right to buy or sell a certain number of a specific commodity at a specific price at a specific future time. It is a right of choice. It is also a financial instrument produced based on futures, which gives a buyer (holder) the right to buy or sell the underlying asset. An option holder has the right to choose to buy or not to buy or to sell or not to sell the underlying asset within a specified timeframe and can either execute or waive such a right, while an option seller only assumes the obligations as stipulated by the option contract.

2. Types of Options

(1) Options are classified into call options and put options by rights of the options:
  1. Call Options: After paying a certain amount as premium to the option seller, the option buyer has the right to buy a certain quantity of a specific commodity prescribed by the option contract from the option seller at predetermined price in the valid period of the option contract, but is not obliged to buy. The option seller is obliged to sell specific commodity prescribed by the option contract at predetermined price in the option contract upon request of the option buyer in the valid period provided by the option contract.
  1. Put Options: After paying a certain amount as premium to the option seller, the option buyer has the right to sell a certain quantity of a specific commodity prescribed by the option contract to the option seller at a predetermined price in the valid period of the option contract, but is not obliged to sell. And the option seller is obliged to buy the specific commodity prescribed by the option contract at a predetermined price in the option contract upon request of the option buyer in the valid period provided by the option contract.
(2) Options are classified into American options and European options according to their delivery date:
  1. American options: the buyer can exercise their rights at any time in the valid period prescribed by the option contract;
  2. European options: the buyer can only exercise their rights on the expiry date prescribed by the option contract. These contracts automatically become invalid after expiry.
  3. The vast majority of US stock options are American options, while index options are generally European options.
(3) Options are also classified into stock options, stock index options, interest rate options, commodity options and currency conversion options according to the object in the option contract.

3. Important terms for options

(1) Strike Price, also referred to as exercise price: If, for example, the market price of X shares is USD10 and you buy USD15 of call option, the strike price will be USD15.
(2) Expiration Date, also referred to as exercise date: For example if the option you bought expires on December 18, 2022, then that day is the expiration date.
(3) Open Interest: The quantity of contracts that are not due and executed yet.
(4) Contract: The unit of option is the contract, and each contract represents the right to trade on 100 shares.
(5) Settlement type: Stock options are generally settled in the form of physical settlement, while Index options are generally settled in the form of cash settlement.

4. FAQs

(1) What is the minimum trading unit for US stock options?
The minimum trading unit for US stock options is 1 contract, generally equivalent to 100 shares.
For example, a call option of SPY that has the expiry date of March 11, 2016 and strike price of 195.5, with a current price of USD2.1 would have a contract value of USD2.1*100 = USD210.
(2) What is the commission fee for options?
USD0.95 per lot, and at least USD2.98 per order.
(3) Are pre-opening and post-closing option transactions allowed?
No, options must be traded in EST between 9:30–16:15.
(4) When can options be exercised?
Exercise at expiration: Options will generally be exercised or cancelled after the close of trading on the expiration date. If the expiration date is on a holiday, the exercise or cancellation time may vary. Please refer to your order details for more information.
Exercise in advance: Tiger does not support exercising options in advance. The duty party of the option, i.e. the seller, may be requested by the right party (buyer) to exercise the option in advance at any time.
(5)Can I close out any option position at any time before the expiry date?
Whether it is a long position or short position can be closed out at any time before its expiry.
(6) What will happen to my option position on the expiration date if I neither exercise the option nor close out the position?
Stock options that expire with in the money value equals to $0.01 or more will be exercised by the system. It will be closed out at the market price if the investor’s margin is insufficient. If the position cannot be closed at market price due to illiquidity, Tiger reserves the right to void the option, a process that will result in the full value of the option being voided.
(7)What if I bought an in the money option contract with the value less than $0.01, how my option contract will be treated at expiry if I neither exercise it, nor close out the position?
Under such circumstances, your loss will be your premium; however, your loss may be more if you choose to exercise it.
(8) Will forced liquidation or close out of position be recorded in my transaction history?
Yes. they will be recorded in the transaction history.
(9) Why is an option order not filled?
Option orders may not be filled for the following reasons:
  1. Out-of-sync quotes from different exchanges might make it impossible to file an orders timely;
  2. If there are different tick sizes for different exchanges;
  3. Due to the existence of combined orders for options, submitted unilateral buy or sell orders for options are not always filled. For instance, for a BABA’s option bought at 4.40 and sold at 4.50, any 4.50 unilateral buy order may not be filled because it might just be a part of a certain combined order;
  4. If there is no sufficient market liquidity.
(10) What should I do if I exercise the option contract however without sufficient funds available in my account to meet the margin requirements?
 
Tiger Brokers will calculate and monitor amount of funds required to exercise the option contract before its expiry from time to time. Tiger Brokers may force liquidation of your account position to avoid the situation where the contract is exercised without sufficient funds available in your account. Please close out your position or deposit funds into your account promptly before option expiry if you expect your account will remain shortage of funds.
 
In order to ensure margin requirements are met at all times, Tiger reserves the right to:
  1. Force liquidate positions prior to expiration,
  2. Allow options to lapse,
  3. Allow options to be exercised and liquidate other positions.
(11) Can I trade stock options that expire at any days of the week on Tiger Trade platform?
Tiger only supports trading of stock options that expire on Friday, however, we aim to enable more varieties for clients to trade.
(12)Can I trade index options that expire at any days of the week on Tiger Trade platform?
Tiger currently supports the Index options with expiration dates on Mondays, Wednesdays, and Fridays.
(13) What are the differences between Weekly Index options and Monthly Index options?
Weekly Index options are generally settled in the form of P.M. Settlement, where the last trading day is the Expiration date, with options settled at the settlement value which is calculated after the closing of the expiration date based on the price of the underlying contract. Monthly Index options are generally settled in the form of A.M. Settlement, where the last trading day is the T-1 day of the Expiration date, with options settled at the settlement value which is calculated after the opening of the expiration date based on the price of the underlying contract.
(14) How to distinguish between Weekly options and Monthly options?
Weekly Options have a "W" identifier after the Expiration date on the Options Chain, whereas Monthly options don't have the "W" identifier.
(15) Index options with which are available for trading?
Tiger Brokers currently supports index options trading including SPX, DJX, NDX, VIX and XSP. We aim to enable more index option products for our client to trade in future.
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