What is option margin?

Option deposit means that the buyer pays royalties to the seller in the option transaction, and the buyer obtains rights, but has no obligation. Therefore, apart from royalties, buyers do not need to pay a deposit. For the seller, the buyer's royalty is only an obligation rather than a right, so it is necessary to pay a deposit to ensure that the buyer will fulfill the option contracts when exercising the option.

Some explanations on the calculation formula of deposit;

1. The seller shall receive the royalties from the buyer before the expiration of the option, that is, before the end of the stock introduction, and deposit them in the exchange as part of the seller's guarantee.

2. After the actual option is implemented, the seller's option contract will be converted into a futures contract. Therefore, the option deposit formula includes the deposit part of the delivery contract.

3. It is very unlikely to execute the virtual option, and the deposit collected according to international practice is 1/2 of the option value. However, for deep imaginary options, if 1/2 of the imaginary value of the option is subtracted, the margin calculation result may be negative or zero, so in this case, a considerable fee will usually be charged.