Options

Frequently asked questions

• What are the advantages of using options?

  The option contract gives an opportunity to control somewhat larger positions with a relatively small amount of capital. From the perspective of risk hedging, such a contract may serve as an "insurance policy" against unfavorable asset price movements on the market.

• What type of investors may use options?

  Options can be used by investors seeking to make a profit both on price increases and price drops.

• What types of options are there?

  There are two types of options: The "call" options give the buyer the right to buy a specified asset at a specified price. The "put" options give the buyer the right to sell a specified asset at a specified price. On the other side, the seller of a "call" option assumes the obligation to sell a specified asset at a specified price, whereas the seller of a "put" option assumes the obligation to buy a specified asset at a specified price.

• How can one make a profit by using options?

  "Call" options can be used for making a profit on rising prices. "Put" options, conversely, can be used for making a profit on falling prices.

• What risks do options entail?

  When buying options, the buyer cannot lose more than the price or the premium paid - the maximum amount of potential losses is known in advance. One should also bear in mind that the prices of option contracts may fluctuate substantially - the investor must have a high risk tolerance when making investments in options. For further information about risks, see the Guide for Transactions in Financial instruments available on the Swedbank website under "Retail banking" > "Savings and investments" > "Investments" > "Protection of investor interests".

• What are the conditions of options?

  One option contract with equities serving as the underlying asset normally comprises 100 shares. Equity index options may have different contract sizes - for example, one German DAX index option contract comprises 5 index units. Options traded in the over-the-counter market have terms and conditions that are agreed individually at the time of buying the contract, that way allowing investors to find an arrangement that suits them best.

• What do I need in order to be able to trade options?

  In order to trade options, you need to sign the Agreement for Financial Market Transactions and fill out the Complex Financial Instruments questionnaire.

• What are the underlying assets of options?

  The underlying assets of option contracts include equities, equity indexes, foreign exchange and, for example, commodity futures.

• How to give orders for trading options?

  Option contracts can be traded on business days from 09:00 to 17:00 by phone.