Knockout Options: Market Information

Knockout Options
Market Information

Market hours

Knockout Options follow the same trading hours for the underlying market. Full market hours are listed on the market information sheets in the trading platform.

Knockout Option types

There are two types of knockout options, UP KO and DOWN KO, and you can only hold a buying position.

If you anticipate a rise in the price of the underlying asset, you would buy an UP KO position.

If you anticipate a fall in the price of the underlying asset, you would buy a DOWN KO position.

Spreads

Spreads are subject to fluctuation and may change, especially in volatile market conditions. The current spread of a Knockout Option market at a given time can be viewed on the deal ticket in the trading platform. Knockout Option spreads cover the protection of the guaranteed Knockout Level.

Maximum risk and margin requirement

The Maximum Risk - the maximum amount you can lose on the trade, should the market move against you and your Knockout Level is reached - is calculated as: Knockout option price x trade size.

The margin requirement for a Knockout Option trade - known as the 'premium required' - will be equal to your Maximum Risk.

Knockout Level

You set your Knockout Level when opening a position. Each market has a minimum distance away from the Underlying City Index price, which you will see on the deal ticket.

If your Knockout Level is reached, your position is immediately closed at 0 ensuring that any losses are limited to the amount you were willing to risk when opening the position.

Knockout Option Price

This is the distance between the price of the underlying market at the time of placing the trade and the Knockout Level

For an UP KO trade: City Index underlying Ask price - Knockout Level

For a DOWN KO trade: Knockout Level - City Index underlying Bid price

Knockout Expiry

Knockout Options have an expiry, with the expiry month stated in the name of the market e.g. USD/JPY Feb 22 UP KO (this indicates the Knockout Option expires on the last trading day of February 2022). If a position is still open at the time of the market expiry, City Index will automatically close the position at the mid-price of the Underlying and you will receive the profit or loss on that position.

Overnight financing

Should you hold a position overnight on an FX market, there will be an overnight financing adjustment. We use swap points to calculate the daily overnight financing adjustment amount for FX pairs.

More details on our charges.

Knockout Option positions held on Indices and Commodities will not be charged overnight financing.