Welcome to the Help Center.

 

Option Trading

Options trading involves high risk. We strongly suggest you read our risk disclosure prior to starting your investment in options.

1. About Options

Option is a type of financial product (contract) that is derived from the underlying asset, it gives buyer a right, but not an obligation, to buy or sell certain underlying asset at an agreed price and date. The option holder can either sell the contract or exercise the right within a prescribed timeframe, or either exercise it on the expiration date or waive the exercise right. The option seller only assume and fulfill the obligations, but not a right, as stipulated on the option contract.
 

2. Types of Options

(1) Call option and Put option
i. Call option: the buyer of the call option has a right, but not an obligation, to buy certain underlying asset within a specific time period, at a predetermined price, as stipulated in the option contract after paying seller the premium. The seller of a call option contract is obliged to sell the underlying asset to the contract buyer according to the terms, including price and quantity, as stipulated in the contract if the buyer exercises the right.
ii. Put option: The buyer of the put option has a right, but not an obligation, to sell certain underlying asset within a specific time period, at a predetermined price, as stipulated in the option contract after paying seller the premium. The seller of a put option contract is obliged to buy the underlying asset from the contract buyer according to the terms, including price and quantity, as stipulated in the option contract if it is exercised by the option buyer.
 
(2) American option and European option:
i. American option: American option can be exercised at any time as prescribed by the contract prior to the expiration date.
ii. European option: European option is only allowed to be exercised on the expiration date prescribed by the contract.
iii. Most stock options are American options and index options are generally European options.
 
(3) Option products usually refer to stock options, index options, interest rate options, commodity options and foreign exchange options.
 

3. Important terms for options

(1) Strike Price: it also refers to exercise price. A strike price is the price at which the option contract can be exercised to buy or sell the underlying asset.
(2) Expiration Date: it also refers to exercise date. It is a date when option contract will be rendered null and void after its expiration.
(3) Open Interest: it is the total number of outstanding option contracts that have not been settled for an asset.
(4) Contract: it is an agreement between two parties to facilitate a potential transaction on an underlying asset. For a stock option, a single contract usually covers 100 shares of the underlying stock.
5)Settlement type: Stock options are generally Physically settled, while Index options are generally cash settled.

4. FAQs

(1) What is the minimum trading unit for a US stock option?
The minimum trading unit for a US stock option is 1 contract, which generally equivalents to 100 shares of the underlying stock.
For example, a call option contract SPY, the expiration date is on March 11th 2016, with strike price of $195.5, the current price is USD2.1 and thus the contract value is USD2.1*100 = USD210.
 
(2) What is the commission fee for options?
USD 0.95 per contract, USD2.98 minimum per deal.
 
(3) Are there pre-opening and post-closing market sessions for US option transactions?
No, US options trading schedule is from 9:30–16:15 (EST), Monday to Friday.
 
(4) When will the options be exercised?
Exercise on Expiration Date: Option contracts will generally be exercised or cancelled after the close of the market on expiration date; if the expiration date falls on a holiday, the exercise or cancellation time of the option contracts may change, please be aware of the notice of change in your account.
Early Exercise: This type of right exercise applies to American option only. But please note that, Tiger does not support the right party's (the buyer) early exercise of American option. However, the duty party of the option, i.e. the seller, may be required to settle the underlying asset if the contract is early exercised by the right party, i.e. the buyer.
 
(5) Can option contracts be closed at any time before the expiration date?
Options purchased prior to the expiration date, no matter long position or short position, can be closed at any time during the trading session prior to the expiration date at market price.
 
(6) On an expiration date of an option contract, how an in-the-money option contract be settled if no action taken?
Automatic exercise will occur for the account that option contract is expiring at a price $0.01 or more in-the-money at expiration. However, if a customer's account has insufficient margin to exercise the right then the contract will be closed at a market price. If due to the reasons, such as illiquidity of the market, or other uncertain issues, resulting in the option contract cannot be closed immediately. Tiger reserves right to inform its executing broker to render your option contract void, which means you will loss full value of the contract.
 
(7) What would happen if I purchased an option contract (put or call) with the value less than $0.01 in-the-money at expiration and no action taken?
Under such scenario, the option contract would be rendered null and void. The loss would only be premium. In fact, if you take action to exercise the option contract, which would cause your loss more than just premium.
 
(8) Will it be recorded somewhere in the Tiger Trade app if my option contract is rendered null and void?
Yes, the details will be recorded in your order records.
 
(9) Why my order is not executed?
It may be the following reasons, including but not limited to:
i. Quotations from different exchanges are not synchronised.
ii. Minimum price fluctuations of exchanges are different.
iii. An individual buy/sell order may not be filled due to Spread Orders.
iv. No market liquidity.
 
(10) What would happen if I am unable to meet the margin requirement?
Your account will be monitored by our risk team prior to the close of the market to ensure the account has sufficient funds available for the purpose of settling the underlying asset after the exercise of the contract. If your account is unable to meet the margin requirement for settling the underly asset, Tiger reserves right to exercise force liquidation of the position of your account to avoid margin call. Please deposit sufficient funds to your account to ensure margin requirement is always satisfied, or close your position if you expect insufficient margin would appear in your account after your exercise of option.
In order to mitigate the risk of insufficient margin, Tiger reserves the right to:
i. enable forced liquidation prior to expiration of your contract,
ii. render option contract null and void,
iii. facilitate the exercise of your option contract but liquidate other positions of your account.
 
(11) Stock options that expire on which days are available for trading?
Tiger currently only support the stock options that expire on Friday, however, we aim to continuously enable and offer more selections for our customers to trade.
 
(12) Index options that expire on which days are available for trading?
Tiger currently supports the trade of Index options that expire on Friday.
 
(13) What are the differences between Weekly Index options and Monthly Index options?
Generally, for weekly index options, the last trading day of the option is the day of contract expiration. The value of the contract is calculated and settled based on the price of the underlying index after the close of market (P.M. Settlement); for monthly options, the last trading of the option is the day prior to the expiration, the contract value will be settled according to the price of the underlying index after the market open on the expiration date (A.M. Settlement).
 
(14) How to distinguish between Weekly options and Monthly options?
Weekly options will be marked with an identifier- "W" after the expiration date on the Options chain, Monthly options are without such identifier.
 
(15) How many index options that Tiger supports to trade?
Tiger currently supports SPX, DJX, NDX . We aim to continuously enable and offer more selections for our customers to trade.
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