Totality operates two client margin profiles related to trading listed options¹:

• Basic profile: the client can buy (hold) listed options
• Advanced profile: the client can buy (hold) and sell (write) listed options. The client will receive margin benefits when trading an option strategy and/or a portfolio of listed products, i.e. a combination of listed options and/or underlying instruments.

 Listed options – profile requirements

By default, clients are assigned the Basic profile, which does not permit the selling (writing) of listed options.

To gain access to this functionality, clients must upgrade to the Advanced profile. This requires meeting specific eligibility criteria.

• The client must provide written acknowledgement of the risks involved with short selling (writing) options

¹ Listed options include equity options and contract options on futures and indices.

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For American-style options, holding short positions can result in significant margin requirements. However, these can be reduced—or even eliminated—when combined with offsetting positions, such as long options or the underlying asset.

Totality offers margin relief for the following position combinations:

• Covered call – A short call option backed by a long position in the underlying asset
• Call/put spread – A combination of long and short options at different strike prices
• Short Straddle – Simultaneous short positions in both a call and a put option at the same strike price

These strategies help manage risk exposure and reduce the capital required to maintain positions.

Covered call

A short call position can be offset with a long position in the underlying stock.

Call/put spread margin treatment

A spread position involves holding both a long and a short option of the same type (call or put) on the same underlying asset. When the long leg is deeper in the money than the short leg (a debit spread), the value of the long option fully offsets the short position, and no additional margin is required.

In contrast, if the short leg is deeper in the money (a credit spread), the long option still provides coverage, but an extra margin equal to the difference between the strike prices is required.

Important tip:
When closing a spread, it’s recommended to exit the short leg first. Closing the long leg first may expose you to the full margin requirement of a naked short position. In some cases, the margin reserved for the spread may not be enough to buy back the short leg, potentially locking you into the position unless additional funds are added.

Short Straddle / Strangle margin treatment

Unlike spreads, short straddles and strangles involve two uncovered positions—a short call and a short put—on the same underlying asset. Since these positions don’t offset each other, only the leg with the higher margin requirement is used to determine the margin.

If the call leg is exercised, the client must deliver the underlying stock. If the put leg is exercised, the client must take delivery. In the latter case, the resulting long stock position can be paired with the remaining short call to form a covered call.

For certain instruments, including stock options, Totality applies a margin charge to account for potential losses. These options are treated as full premium style, meaning the entire premium is paid upfront, but margin may still apply depending on the position.

Full premium example:

When acquiring a long position in a full premium option, the premium amount is deducted from the client’s cash balance. The value from an open long option position will not be available for margin trading other than indicated in the margin reduction schemes.

In the following example, a client buys one Apple Inc. DEC 2013 530 Call @ $25 (Apple Inc. stock is trading at $529.85. One option equal 100 shares, buy/sell commissions $6.00 per lot and exchange fee is $0.30. With a cash balance of $10,000.00, his account summary will show:

In case of a full premium option, the transactions not booked will be added to the client’s cash balance in overnight processing. The next day, when the options market has moved to $41 (spot at 556.50), the account summary will show:

‍Short option margin requirements

Holding a short option position exposes the trader to the risk of assignment, requiring delivery of the underlying asset if the option is exercised by the counterparty. Because losses can be significant if the market moves unfavourably, Totality applies a margin framework to manage this risk.

A premium margin is charged to ensure sufficient account value is available to close the short position if needed. In addition, an extra margin is applied to account for potential overnight movements in the underlying asset’s value.

Margin requirements are monitored in real time. If the total margin across all open positions exceeds the client’s margin threshold, a stop-out may be triggered to protect against further losses.

 The generic formula for the short option margin charge is:

• Short Option Margin = Premium Margin + Additional Margin

Premium and additional margin for short options

The premium margin ensures that a short option position can be closed at the current market price. It is calculated based on the prevailing ask price—the cost to repurchase the option during trading hours.

An additional margin is applied to account for potential overnight price movements in the underlying asset, particularly when the option cannot be closed due to limited market hours.

Stock Options

For options on Stocks, the additional margin equals a percentage of the underlying reference value minus a discount for the amount that the option is out-of-the-money.

• Additional Margin Call = Max (X% * Underlying Spot) – Out-of-the-Money Amount, Y% * Underlying Spot)

• Additional Margin Put = Max (X% * Underlying Spot) – Out-of-the-Money Amount, Y% * Strike Price)

The margin percentages are set by Totality and are subject to change. The actual values can vary per option contract and are configurable in the margin profiles. Clients can see the applicable values in the trading conditions of the contract.

The out-of-the-money amount for a call option equals:

• Max (0, Option Strike – Underlying Spot)

The out-of-the-money amount for a put option equals:

• Max (0, Underlying Spot Price – Option Strike)

To get the currency amount involved, the acquired values need to be multiplied with the trading unit (100 shares).

Example:

Let’s suppose FORM applied an X margin of 15% and a Y margin of 10% on Apple stocks.

A client shorts an Apple DEC 2013 535 Call at $1.90 (Apple stock at 523.74). The option figure value is 100 shares. The OTM amount is 11.26 stock points (535 – 523.74), resulting in an additional margin of 67.30 stock points ($6,730). In the account summary, the premium margin is taken out of the position value:

‍Corporate actions and option adjustments

Corporate actions involving a company’s shares can impact listed options tied to those shares. In such cases, adjustments may be made to the option contracts to ensure that the value of the position remains consistent before and after the event.

 Key Definitions

• ‍Corporate actions: Events initiated by a company that may affect its share price or the number of outstanding shares. These include actions such as share splits, mergers, rights issues, conversions, spin-offs, and dividend distributions.‍
• Ex-Date: The effective date of the corporate action. From this date onward, the security trades without the value of the declared dividend or distribution.

Corporate actions and option adjustments

Corporate actions affecting the underlying stock may require adjustments to listed option contracts to maintain the economic value of the position. Exchanges handle these adjustments differently and determine the appropriate treatment on a case-by-case basis.

Two common adjustment methods are:

• ‍Ratio method – Adjusts the contract terms proportionally‍
• Package method – Redefines the deliverable as a combination of securities and/or cash

Totality follows the official exchange notices when applying these adjustments. However, if a corporate action results in a deliverable that Totality cannot support—such as a basket of securities or mixed components— Totality reserves the right to close out affected client positions prior to the ex-date.

For example, in spin-offs or demergers, the adjusted option may settle into multiple deliverables. If the underlying asset becomes a package of securities and cash, Totality will not support the position and will close any open contracts accordingly.

Clients holding long positions in American-style options may exercise them at any time before expiry—except on the final trading day. To exercise, clients can submit a request via the Positions section of the trading platform.

Once exercised, the option is closed at a value of zero, and a position in the underlying asset is opened at the strike price—this process is immediate.

However, clients are encouraged to consider closing the option in the market and purchasing the underlying asset separately. In many cases, the market value of the option may exceed the profit from exercising it.

Note: Currency options traded on the CME cannot be exercised if they are out of the money. Any such requests will be automatically cancelled.

During holidays, markets and exchanges around the world are closed at certain times. Upcoming holiday schedules will be posted below.