Listed options trading (also referred to as listed foreign exchange or FX options trading) involves speculation on the price movements of currencies using an option contract. These contracts trade on regulated exchanges, including Belgium’s Financial Services and Markets Authority (FSMA).
The listed options market is an alternative for those who want to trade on the FX market but lack the financial means or the time needed to monitor and manage a Forex portfolio actively.
How do I open a listed options position in Belgium?
To open a position on listed options, you must first choose the asset for which you want to make trading and the expiry date of your contract. To do this, you can visit the Saxo website for a demo account and guidance on the amount of money to place as a margin. In addition, you will get advice on the minimum contract amount and the available contract price ranges.
How does this market work?
Listed options trade exactly like regular options but trade on an exchange similar to shares or futures, with regulated margins and possibly selling the contracts short. Their fixed underlying is a contract amount of foreign currency in relation to another one.
Listed options trading allows traders to:
- Gain exposure to foreign exchange rate variations on a specific amount of money by acquiring options contracts.
- Increase their potential returns by trading with leverage, without having to use forex accounts or open new positions after each price move (forwards)
- Reduce the risk of loss in case they wrongfully estimate the movement direction of an asset
Advantages of Listed Options Trading
The forex options market has become increasingly popular since its inception due to the following reasons:
- They are easy to understand and suitable for any investor, including those without trading experience.
- The possibility of making large profits from a relatively small investment.
- Some derivatives allow investors to speculate on the volatility of certain currencies or their future prices without necessarily owning them, which provides excellent hedging opportunities.
- Unlike standard forex trading, investors can choose when they want to trade in listed options instead of having to do it 24 hours a day.
- Greater transparency due to regulations in Belgium by the FSMA.
Valuable options trading tips
- It is essential to select a reputable regulatory body or forex platform provider such as Saxo.
- A review of traded currency pairs ensures they are liquid enough for trading.
- There should be a wide range of expiry times available to choose from, with the ability to trade weekly options if desired.
- It is better to choose lower leverage than the allowed maximum
- You analyze the possible risks and rewards of each option contract before placing a trade, including looking at any initial charges
Regulations
Listed options trading in Belgium must adhere to strict rules set out by the European Commission, these include:
- Minimum lot sizes of 100 securities and contract sizes of12 months, which ensures that option positions are highly liquid;
- the obligation to report trading in options (and other financial instruments exceeding certain thresholds) daily;
- stricter capital requirements than for other derivatives, making the Belgian options market more secure;
- rules governing the calculation of breakeven levels and margin calls so that investors are not at risk of significant losses or defaults;
Further information about listed options trading is available from Belgium’s Financial Services Markets Authority (FSMA).
Your Final Take
Several listed options on Belgian index components on European stock exchanges show potential for this new market segment.
Listed equity-linked products can also benefit from the high liquidity of the global equity derivatives markets, allowing investors to fine-tune their investment strategies.
Listing on some of the world’s leading options exchanges could help Belgian companies to raise funding on more favorable terms, as they would benefit from the improved efficiency of listed equity-linked products.